Backed by good rainfall and government policies, H2 volumes may rise in double digits in percentage terms, leading to a growth in overall FY2025 sales, say industry players and analysts.
04 Jan 2025 | 5311 Views | By Yukta Mudgal
Tractor sales in India are recovering after a period of slowdown following the financial year that ended in March 2023 (FY2023), when they had hit a record 9.45 lakh units despite the pandemic. Still, the current fiscal year’s numbers will likely be below that peak and growth is anticipated to ...
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Tractor sales in India are recovering after a period of slowdown following the financial year that ended in March 2023 (FY2023), when they had hit a record 9.45 lakh units despite the pandemic. Still, the current fiscal year’s numbers will likely be below that peak and growth is anticipated to be limited to mid-single digits in percentage terms.
Industry leaders and analysts say that FY2025 is a story of two halves, with almost flat sales in the first half, followed by a potential double-digit percentage growth in the remaining six months.
During the first half, the industry sold 4,72,000 units, a marginal increase from 4,69,000 units in the year-ago period. Still, major tractor makers such as Mahindra & Mahindra and Escorts Kubota have a positive outlook for the industry’s FY2025 numbers.
Retail sales in FY2025
Retail sales of tractors declined on a year-on-year (YoY) basis for four consecutive months – 1% in May, 28% in June, 12% in July and 11% in August, as per data from the Federation of Automobile Dealers Associations (FADA). They revived in September, registering a 14.7% increase at 62,542 units.
The primary reason for the revival was the 8% above-normal rainfall during monsoon, which led to a 1.5% YoY rise in the sowing of kharif crops. This positively impacted rural demand and economic sentiment, said FADA president CS Vigneshwar.
In October, sales rose to 64,433 units from 62,507 units a year ago – dropping 1.3% YoY in rural areas and increasing by 5.4% in urban areas, according to FADA.
Retail sales of top tractor brands, Mahindra & Mahindra and its Swaraj division, grew by 4.3% and 1.5%, respectively, in October, to 14,792 units and 11,227 units. Sales of Sonalika Tractors (International Tractors Ltd) also inched up to 7,983 in October from 7,713 units in the year-ago period.
John Deere, which has a market share of 9.13%, recorded 29% YoY growth with 5,884 units sold in October. Sales also rose for CNH Industrial (4.6% to 2,596 units) and Kubota Agricultural Machinery (6.3% to 1,161 units) in the same period. Tractors and Farm Equipment Ltd’s sales remain nearly flat at 8,767 units.
The companies that reported a decrease in their October numbers include Indian multinational conglomerate Escorts Kubota (3.57% to 6,043 units; 9.38% market share) and Eicher Tractors (13.5% drop).
Q2 results
Despite achieving its highest-ever domestic market share of 42.5% in the second quarter and a 4% rise in volumes to 92,382 units, the farm machinery business of M&M posted a 2% YoY decline in its consolidated revenue to Rs 8,194 crore. However, its profit before interest and taxes rose to Rs 1,115 crore from Rs 1,047 crore, with margins improving to 13.6% from 12.5% during the period.
On a standalone basis, farm equipment and construction machinery manufacturer Escorts Kubota recorded revenue from operations of Rs 2,476.2 crore, up 0.5% YoY, and a 53.2% jump in its standalone profit after tax to Rs 326.7 crore. While tractor sales saw a marginal decline of 0.9% to 25,995 units, operationally, the company maintained strong efficiency levels, with tractor capacity utilisation at approximately 73%.
Festive season sales decline
Tractor retail sales slipped 1.64% to 85,216 units during the current fiscal’s 42-day festive period, making it the only vehicle segment that posted a decrease, as per FADA. Tractors are used not only for agricultural purposes but also for commercial activities, and the decline in demand was primarily due to reduced infrastructure spending, particularly road construction.
The festive season data compiled vehicle retail sales from the start of Navratri to 15 days post-Dhanteras (from October 3, 2024, to November 14, 2024).
“The auto industry is yet to fully benefit from a government push in infrastructure spending, which we expect will bolster commercial vehicle sales,” said Vigneshwar. On the outlook for the rest of the year, he said the tractors segment should perform better, supported by good rainfall and the increase in the Minimum Support Price (MSP) for crops.
Outlook for the Indian tractor industry
Robust monsoon precipitation, increased reservoir levels, higher kharif crop yields and supportive government policies, including a rise in the MSP for rabi crops and rural development spending, are driving the positive outlook for the industry.
India’s largest tractor manufacturer, M&M, revised the growth forecast for the tractor industry to 6-6.8% for the current financial year from its earlier projection of 5%. “We are seeing some really good revival of the rural economy... For the second half of the year, we expect the industry to grow 13-15%,” said Rajesh Jejurikar, executive director and CEO for the Auto and Farm Sector at M&M.
Hemant Sikka, president of the Farm Equipment Sector at M&M, noted that the first half saw minimal growth, with an increase of just 0.5%, but as the year progressed into the second half, the industry picked up pace. “The year 2024 has been quite a story of two halves,” he said.
Escorts Kubota’s whole-time director and chief financial officer, Bharat Madan, told Autocar Professional that the industry growth in the current financial year is likely to be in the mid-single digits. “This year, we think the industry will grow in mid-single-digit numbers. The first six months were more or less flat. However, October has seen good growth, and we expect the momentum to continue in the coming months.”
In 2024, a good rainfall pattern, with an 8% increase over the long-term average, has boosted reservoir levels to 87% of total capacity, supporting healthy kharif crop production and profitability. This is expected to drive tractor sales in the final quarter of the fiscal year, with an optimistic outlook for the rabi season.
“The reservoir level going up is a very significant enabler,” Jejurikar said. “Farmer terms of trade continue to be strong. We have started seeing an increase in government spending in rural and agricultural sectors from August. This is another key enabler that will help the rural economy and the tractor market in particular.”
According to analytics and ratings firm Crisil, the industry is likely to grow by 2-4% in FY2025, reaching 8,95,000 to 9,10,000 units. Over the next five years, tractor sales are expected to grow at a compounded annual growth rate of 4-6%, driven by increasing tractor adoption, government support for farm incomes, agricultural output, mechanisation and investment in rural infrastructure.
Meanwhile, the upcoming TREM Stage V emission norms are likely to be implemented from April 2026 and are expected to spark a pre-buying surge in the tractor industry. The stricter emission standards will likely lead to higher tractor prices, prompting customers and dealers to accelerate purchases of existing models that comply with the current rules.
And Escorts Kubota’s Madan expects industry volumes to hit a new peak in FY2026. “There is a possibility of the new emission norms to come in from April 1, 2026. If that happens, there will be a lot of pre-buying that will happen in the Q3 and Q4 of the next financial year [FY2026],” Madan said.