Tractor Dispatches Forecast to Grow 7% in February Despite Retail Decline, Motilal Oswal Reports

Tractor dispatches are expected to grow approximately 7% year-over-year in February 2025, contrasting with a projected 4-5% decline in retail sales, according to a recent sector update from Motilal Oswal Financial Services.

The February 27 report by analysts Aniket Mhatre and Amber Shukla reveals that tractor demand has remained weak across regions, with overall sentiment subdued primarily due to lower crop prices.

"Our channel check suggests a retail volume decline of 4-5% YoY as tractor demand remained weak across regions, with overall sentiment subdued due to lower crop prices," the report states.

The analysis highlights specific challenges in key agricultural states including Maharashtra and Karnataka, where "crop prices of toor, soybean, and cotton declined up to 20-25% than the usual prices, thereby dampening overall footfalls."

Non-agricultural tractor demand has performed even worse, with the report forecasting "a volume decline of ~16-18% in this category."

Despite these retail challenges, manufacturers are expected to push more units into the channel, with Mahindra & Mahindra and Escorts Kubota projected to increase dispatches by 8% and 5% year-over-year respectively in February.

Inventory levels at dealerships are currently in the range of 40-45 days, according to the report, with no major price hikes implemented by manufacturers. Discounts have remained stable at around INR40,000-45,000, while loan-to-value ratios vary between 70% and 90%, with financing becoming "slightly stringent this month."

The report also notes increased competitive intensity in certain markets, particularly in Punjab, "primarily due to lower-priced offerings from rivals."

Looking at the broader market, Motilal Oswal maintains M&M as one of its preferred picks among auto OEMs, citing "the upcycle in tractors and healthy growth in UVs."

This divergence between growing wholesale dispatches and declining retail sales suggests manufacturers may be anticipating a potential recovery in demand or building inventory ahead of the important agricultural season, despite current market challenges.

January Retail Sales

In contrast, the Indian tractor market kicked off 2025 with a strong performance, as retail tractor sales in January reached 93,381 units, reflecting a 5.23% increase compared to the 88,741 units sold in January 2024, according to data released by the Federation of Automobile Dealers Associations (FADA). 

This growth, driven by leading manufacturers like Mahindra & Mahindra, John Deere, and Escorts Kubota, underscores a resilient rural economy and rising demand for agricultural mechanization amid favorable farming conditions.

Mahindra & Mahindra, India’s largest tractor manufacturer, maintained its dominance with a 23.64% market share, selling 22,072 units in January 2025, up 7.71% from 20,492 units the previous year.

Industry analysts pointed to several factors driving the January upswing.  The introduction of advanced models, such as Mahindra’s Yuvo Tech+ series and John Deere’s tech-enhanced tractors showcased at the Krishi Darshan Expo 2025 in Hisar, has also spurred demand. However, some regions are still recovering from uneven rainfall patterns in prior years, potentially tempering growth.

The tractor industry’s performance is a key barometer of rural economic health in India, the world’s largest tractor market.