Osaka, Japan: Japanese agricultural machinery giant Kubota is embarking on a bold strategy to conquer the African market. Leveraging the cost-effectiveness of its Indian subsidiary, the company plans to deliver affordable tractors to the continent’s burgeoning agricultural sector. The company plans to ship low-cost tractors manufactured in India to small-scale farms across Africa, aiming to capture a significant market share by 2028.
Kubota aims to sell 5,000 tractors in Africa by 2028, generating nearly 10 billion yen ($72.1 million) in revenue. This strategic shift involves utilizing Escorts Kubota, its Indian subsidiary, to export compact tractor models, rather than relying on more expensive Japanese production. This move is projected to reduce tractor prices by approximately 30%, a crucial factor in the price-sensitive African market.
“The African market will grow,” asserts Kubota President Yuichi Kitao, despite the company’s previous struggles to establish a strong foothold in the region. Kubota’s initial foray into Africa, with a subsidiary in Kenya established in 2017, faced challenges in building a robust sales network and achieving brand recognition.
The company’s new strategy targets countries like South Africa, Tanzania, and Nigeria, where farmers are increasingly adopting mechanized agricultural practices. Escorts Kubota will utilize its established network and the presence of Indian immigrants, who often serve as agricultural machinery wholesalers, to expand its reach. The goal is to capture nearly 20% of the market by 2028.
Kubota’s approach reflects a broader trend of Japanese companies seeking to tap into Africa’s growth potential. However, the continent presents unique challenges, including weaker legal structures, infrastructure limitations, and differing business practices. A Japan External Trade Organization survey revealed that approximately 30% of Japanese manufacturers operating in Africa are expected to incur operating losses in fiscal 2021.
To bolster its African strategy, Kubota has appointed Ravindra Chandra Bhargava, chairman of Maruti Suzuki, as an outside director of Escorts. Bhargava’s expertise in navigating the Indian market, where Suzuki has achieved remarkable success, is expected to be invaluable in Kubota’s African expansion.
The African agricultural market holds immense potential. World Bank figures indicate that agriculture, forestry, and fisheries contribute nearly 20% of GDP in sub-Saharan African regions where Kubota has a foothold. By 2030, the continent’s agricultural-related market is projected to reach $1 trillion.
While the adoption of tractors in Africa lags behind India and South America, demand is on the rise, according to the UN Food and Agriculture Organization. Kubota faces competition from global players like Deere and Co. and CNH Industrial, who have also attempted to leverage Indian manufacturing for African markets, albeit with limited success. Kubota’s success will hinge on its ability to overcome these challenges and establish a sustainable and profitable presence in Africa.
