It was back in April that AGCO surprised the business world by breaking off its historical ties with Indian tractor manufacturer, and major shareholder in AGCO, Tractors And Farm Equipment, or TAFE as it is more commonly known.
This move has left the door open for other suitors from the industry to become involved with TAFE and within three months of the ill humoured rupture, Deutz has stepped into the breach, announcing that it is entering a partnership with the Indian company.
Deutz explained its move by noting that it will allow it to expand its business in India, thereby tapping into one of the fastest growing markets worldwide.
The company also pointed out that the Indian economy grew by around six to seven percent in 2023 and it is expected that India’s GDP will quadruple by 2050, with the agricultural and construction sector playing a major role in achieving this growth.
Engines for India
At the start of what is intended as a long-term cooperation, TAFE Motors will manufacture up to 30,000 engines for Deutz as either 2.2L (50-75hp) and 2.9L (75-100hp) units.
These engines are intended to augment and complement the wide range of engines already made by the group to meet the various emission standards that exist globally.
TAFE Motors will also produce engines to suit newer applications in the Indian market. They will be manufactured in TAFE Motors leading facility at Alwar, Rajasthan, India.
Deutz will use the Indian manufacturing base to promote the remaining engines in neighbouring markets, especially those of the Asian-Pacific region (APAC), benefitting from cost savings in production and logistics.
TAFE and Deutz view the bigger picture
This sort of strategic planning is fairly standard and is only to be expected, yet there are further further factors which help explain the enthusiasm of Deutz in wanting to expand its presence in India.
CEO of Deutz, Dr. Sebastian C. Schulte, noted that the new relationship enables the company to continue producing at competitive cost going forward.
Another benefit is that it makes Deutz less dependent on the existing supplier landscape, which, he claims, is becoming increasingly challenging due to the technological shift and geopolitics.
It is this last point he expands on when in going on to explain that the union will reduce Deutz’s dependence on suppliers in geopolitically sensitive regions, without sacrificing the corresponding cost benefits.
A feature he sees as being of particular benefit to Deutz’s German production sites.
A foothold for Deutz in BRICS
There may be two explanations behind this rather pointed remark, the first is that there is a palpable sense of frustration in Germany about the lack of any resolution to the Ukrainian situation and the reestablishment of normal business with Russia.
The second possibility is that India is one of the original members of the growing BRICS trade bloc, a group of countries that are cooperating closely in trade matters and are keen to replace the dollar as the first currency of global settlement.
Presently, BRICS accounts for 29% of the world’s GDP and is growing fast. German businesses tend to be cooperative in nature, so partnering with a major player within this emerging trade group would make a good deal of sense from the German perspective.
From the point of view of TAFE Motors, CEO of TAFE Motors, Sandeep Sinha pointed out that, the cooperation will be mutually beneficial, as it will offer access to shared resources and technologies to produce engines that complement TAFE Motors’ and the group’s existing range.
He also suggested the cooperation will offer to Deutz access to high quality engines at best cost for new applications in Indian and relevant overseas markets.
Having Deutz as a working partner could well help TAFE expand within European markets. Presently, its tractors are powered by engines from the Perkins camp, which are reliable and easily repairable, yet they might appear dated to some.
Having a more modern Deutz derived motor could well reassure buyers here in the west that TAFE tractors are as worthy of consideration as any other products in the small tractor market, where there is a great deal of competition.