"Production is being stepped up in the plant and we are currently producing 300 units per month, which is expected to reach 500 units by March 2006," Anjanikumar Choudhari, president, M&M farm equipment sector told PTI.

The company, which holds 80 per cent stake in the joint venture with China's Jiangling Motors, formally commenced operations in July this year. It had paid $8 million for its Chinese foray and the Nanchang factory has a capacity of 12,000 tractors per annum.

Choudhari said the company had plans to use the facility not only for gaining a foothold in the Chinese market but also as a manufacturing base for export to other countries.

"In fact, we have already started export of tractors from China," he said, adding that markets being targeted include the US and Australia. "In the US, we are selling tractors in the 20-30 horsepower range," he said.

After the various agreements prior to the signing of the JV agreement last year, the company inherited a manpower of 300 people. Asked whether M&M planned to further rationalise this number, he said there were no such plans for the moment.

On the challenges the company was facing in the market, Choudhari said procuring quality components on a sustained basis was the biggest.

"Our biggest challenge is procurement of quality components on a regular basis. Other issues are related to the layout of the plant and reduction of handling and other losses," he said.

On penetrating the Chinese market, he said the company was optimistic on its prospects, even as its products came at a premium of about 10 per cent to the existing ones in the market. "We are reviving the distribution channel," Choudhari said pointing out the efforts being made to revive the sales set-up.

In July, M&M vice-chairman and managing director Anand Mahindra had handed over the first tractor produced at the Nanchang factory to the city mayor Li Douluo, and another tractor - the FS 250 - to a local farmer.

Mahindra (China) Tractor Co is a joint venture between M&M's 100 per cent overseas subsidiary, Mahindra Overseas Investment Co (Mauritius) Ltd and Jiangling Motor Co Group (JMCG). The joint venture, in turn, acquired the tractor manufacturing assets of Jiangling Tractor Company, a subsidiary of JMCG.