Tractor sales to rebound in the coming months after the fall in August
Cumulative tractor sales of the top five tractor makers – Mahindra & Mahindra (M&M), Tractors Farm Equipment, John Deere India, Sonalika, Escorts – have skidded 17 per cent to 47,630 units in August, from 57,727 units in the corresponding month a year ago.
The decline comes on the back of last year’s high base a wilting pent-up demand. After a high-paced growth seen for over a decade, the rate of growth is expected to moderate to low single digits in the months ahead, but tractor sales for the full year will still touch a fresh high in absolute volume terms, revealed CRISIL Research.
One of the largest markets for tractors globally, India sold 900,000 tractors in 2020-21.The research house expects it to touch 930,000 by the end of 2021-22 (FY22).
Hemant Sikka, president-farm equipment sector, M&M, said a smart recovery in the overall acreage of kharif crops, with most key crops posting acreage levels closer to last year’s sown area, despite erratic monsoon in select markets, bodes well for the tractor market.
During the month, the tractor market leader saw sales decline 15 per cent YoY to 19,997 units. But the company is confident about recouping volumes.
“With the festival period close at hand, which also coincides with the harvesting season, we are anticipating a robust demand,” said Sikka.
Shruti Saboo, associate director, India Ratings & Research, expects tractor sales in FY22 to end with a YoY growth of 3-5 per cent.
“The tailwind for the sector remains strong. The growth may not be as high as it has been in the past month since pent-up demhas already been addressed. But we expect the overall market to grow since the enablers are in place,” said Saboo.
Tractor sales in India have been advancing at a compound annual growth rate of 10 per cent over 15-plus years. Growth henceforth is expected to moderate, wrote Aditya Makharia, vice-president, equity research, HDFC Securities, in a recent research report. He also attributes it to high penetration levels.
Penetration rates for tractors have already risen to 45-50 tractors per 1,000 hectares (ha), which is higher than the world average of 30 tractors per 1,000 ha.
Shailendra Jagtap, managing director country manager at John Deere India, said, “We are quite positive about the road ahead expect sales to rebound in September October since farmers are keen to purchase reliable technologically advanced products.”
The local arm of the American tractor maker, the third largest by sales, sold 7,158 units in the domestic market, down 4 per cent YoY.
Good price realisations of their crop curtailment in lifestyle-related expenses have augmented disposable incomes of farmers. This has augured well for tractor farm machinery equipment, pointed out Jagtap.
After patchy rainfall in August, the southwest monsoon is expected to perform appreciably better in September, with rains projected to be more than 110 per cent of the long period average, but not good enough to recoup the entire seasonal deficiency, the India Meteorological Department said last week.
Therefore, even if it rains heavily in September, it won’t cover up for the full season shortfall, but it will boost the prospects of the next rabi crop fill reservoirs.
Monsoon in August was almost 24 per cent below normal, which was the sixth driest August since 1901. It came on the back of a 7-per cent monsoon shortfall in July.
Tractor makers like Escorts, one of the worst affected in August with sales declining 27 per cent YoY to 4,920 units, are also drawing from high levels of reservoirs government support.
“As we enter the festival season, we see farmer sentiment strong enquiry level building up, driven by favourable macroeconomic factors, reasonably good water level of reservoirs, good pace of kharif sowing, continued support by the government in the agri sector,” said Escorts in a statement.
Some parts of the country have faced a rainfall deficit in July August, it remains to be seen how the monsoon behaves in September, added Escorts.
First Published: Mon, September 06 2021. 15:59 IST