In July, the tractor industry rebounded significantly, with exports reaching new highs. Domestic sales improved year over year as well.
The tractor industry is sticking to its single-digit growth forecast for the current fiscal year, despite the fact that the second half of the year may see some slowdown owing to the high base effect and lower replacement demand. However, thus far, the industry hasn't noticed anything detrimental on the ground.
Last month, total tractor output reached 104,308 units, the second highest monthly production figure in this decade, as pent-up demand remained strong. The total number of units exported was 11,187, which was the greatest monthly total ever.
According to data given by the Tractor & Mechanisation Association (TMA), total domestic tractor sales in July were 65,216 units, up from 63,137 units in July 2020 and 45,571 units in July 2019.
Total domestic tractor sales increased by 29% to 2.95 lakh units in April-July 2021, compared to 2.28 lakh units the previous year, while exports more than doubled to 37,847 units, compared to 18,316 units in April-July 2020. Tractor output increased to 3.53 lakh units, up from 1.92 lakh units previously.
“Tractor retails are already higher than they were pre-Covid in July. Sowing activities will progressively ramp up as the IMD forecasts a typical monsoon between August-September. This would have a knock-on effect on rural sales, particularly in the tractor segment,” said FADA President Vinkesh Gulati (Federation of Automobile Dealers Associations).
Mahindra & Mahindra, the nation's biggest tractor manufacturer, forecasts low to mid-single digit growth for the current fiscal year. South India has been performing better, according to the firm, and the monsoon has now reached the North and East as well.
Optimistic Market Demands
“Demand stayed strong in July, as crop sowing operations gathered impetus and the monsoon began to pick up steam across the country. The rural sector has benefited from the relaxation of Covid restrictions and strong agricultural revenues as a result of record Rabi crop procurement. We remain optimistic on tractor demand in the coming months, owing to the return of the monsoon, an increase in MSP of major Kharif crops, and the forthcoming festival season,” said Hemant Sikka, President of Mahindra & Mahindra Ltd's Farm Equipment Sector.
Escorts, India's fourth biggest tractor manufacturer, expects the tractor sector to expand in the low to mid-single digits this fiscal year.
The company's management stated on the Q1FY22 conference call that macro variables such as monsoon progress, crop output and procurement levels, etc. remain encouraging, but the industry's high installed base is seen as a limiting issue.
Tractor manufacturers are reportedly delaying purchasing decisions or converting inquiries into sales due to frequent price spikes in order to pass on raw material price increases. However, price increases have yet to have a significant influence on volume.
