When Millat Tractors (MTL) recorded highest-ever annual sales volumes in FY11, it also managed to avoid one thing local auto sector is well known for complacency. The same year, Millat began to lobby AGCO, owner of Messey Ferguson brand, to remove the export restriction from tractors and components manufactured by the Company. After a year of intense efforts, the management’s efforts bore fruit and MTL was granted export license in July 2012.
In order to get the restriction removed, a key challenge faced by MIllat involved meeting international quality standards associated with the Massey Ferguson brand. According to Company sources, representatives of the American farm instrument maker visited plants facilities multiple times to assess quality control and assurance, before the agreement was finally reached.
MTL’s Chairman Sikandar Khan is reported to have said its tractors are cheaper than tractors of similar design and quality manufactured in India or China. Competitive pricing has been a key factor in Millat’s success in achieving export contracts for Messey Ferguson, which is an internationally recognized brand. And according to industry experts, its export potential to Middle Eastern and African (MENA) markets currently stands at fifty thousand units per annum.
Under the agreement, MTL was required to commence production by July 2013. This includes production of tractor components and assembly of semi-knocked down units in the range of fifty to eight-five horsepower range for export to AGCO customers in China and Afghanistan, as well as the MENA markets.
But Millat tractor’s global plans don’t just stop here: the Company also formed TIPEG Intertrade, registered at JLT free zone of Dubai. According to the Company, “the foreign buyers are reluctant to travel to Pakistan due to law-and-order situation. The Company feels the need to have an offshore base where buyers can travel freely, have business discussions and place orders.”
The subsidiary is intended to be used as a trading hub to market engineering goods manufactured not just by MTL, but by other group companies such as Bolan Castings, Millat Equipment and Industrial Products.
In itself, a business entity striving to maximize profits by exploiting the export potential of its products sounds plain economics. But the lack of such precedent in local auto industry suggests that MTL achievement is no small feat.
Local car assemblers have long complained that opening up of markets to used car import is no short of an existential crisis for the domestic industry. It is argued that given the bleak demand prospects and lack of scales, domestic industry must be protected against influx of foreign cars. However, the MTL’s success story has proved otherwise.
Millat’s venturing in the export market proves that even in the absence of domestic demand, any local industry can stand on its feet by manufacturing quality products that meet international standards. All it really takes is a will!
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