Aug. 3 (Bloomberg) -- Mahindra & Mahindra Ltd., India’s biggest tractor maker, plans to use China as an export hub for farm equipment to lower production costs.

The company may export as much as 30 percent of its China production in five years, Bharat Doshi, group chief financial officer of Mahindra, said in an interview on July 31. The company now exports a ‘very small number’ of tractors from its two Chinese factories, he said.

Mahindra is expanding in China where manufacturing a tractor is at least 25 percent cheaper than in India, Doshi said. The company has formed two joint ventures in China since 2004, as the world’s most populous nation boosts investments in agriculture.

“The important point in terms of cost structure is the much lower logistics cost,” Doshi said. “Their infrastructure is substantially better.”

Mahindra, based in Mumbai, took an 80 percent stake in a venture with Jiangling Motors Corp. in 2004. It spent $26 million last year to buy a 51 percent stake in a company that held the tractor-related assets of Jiangsu Yueda Yancheng Tractor Manufacturing Co.

Mahindra may also consider sourcing auto components from China for use at its Indian factories, Doshi said. In the year ended March 31, it sold 119,708 tractors, of which exports accounted for 7,013 units.

The Chinese market for tractors has grown at a compounded rate of 25 percent in the past four to five years helped by government subsidies on farm equipment purchases, Doshi said. That compares with the 5 percent to 7 percent growth of India’s tractor market.

Mahindra, India’s largest sport-utility vehicle maker, may also start exporting its vehicles to China in future. “China is definitely a market in which our vehicles can go,” Doshi said without giving a timeframe.

The company is currently readying plans to introduce a diesel pick-up truck in the U.S. by early next year, and has signed agreements with 330 dealers there.

Mahindra’s shares have more than tripled this year, outpacing the 62 percent gain for the Bombay Stock Exchange’s benchmark Sensitive Index.

Source: http://www.bloomberg.com/apps/news?pid=20601087&sid=axbiIQ97iA9w