Despite seeing virtually no growth in the first half, key players expect the second half to deliver volume growth of 10-15%.
10 Nov 2024 | 3709 Views | By Kiran Murali & Yukta Mudgal
After a stagnant first half to the year, the tractor industry is banking on a 'strong performance' in the second half of the financial year to lift them over their full-year targets.
During the first half, the tractor industry's volume remained almost flat at 472,000 units, compared to 469,000 ...
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After a stagnant first half to the year, the tractor industry is banking on a 'strong performance' in the second half of the financial year to lift them over their full-year targets.
During the first half, the tractor industry's volume remained almost flat at 472,000 units, compared to 469,000 units sold in the year-ago period. Despite this, major tractor makers Mahindra & Mahindra Ltd and Escorts Kubota Ltd have an upbeat outlook on the industry for the rest of the year.
"We are seeing some really good revival of the rural economy... For the second half of the year, we expect the industry to grow between 13-15%," said Rajesh Jejurikar, Mahindra & Mahindra's Executive Director and CEO for the Auto and Farm Sector. In keeping with this, the company has revised the growth forecast for the industry for the current financial year to 6.0-6.8% from its earlier projection of 5%.
The tractor industry achieved record-breaking sales in FY23, clocking sales of 945,000 units, a benchmark that is yet to be surpassed.
However, the sales declined 7% in the following financial year 2024 to 876,000 units on account of a high base effect as well as weak precipitation and uneven monsoons.
Escorts Kubota's whole-time director and chief financial officer also 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 for the industry. However, October has seen good growth and we expect the momentum to continue in the coming months," he said.
Factors such as robust monsoon precipitation, increased reservoir levels, higher kharif crop yields, and supportive government policies, including minimum support price rises for rabi crops and rural development spending, are driving this positive outlook for the industry.
"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 from August in rural and agricultural sectors. This is another key enabler that will help the rural economy and the tractor market in particular."
Escorts Kubota's Madan expects the momentum to continue into the next financial year, and expects industry volumes to hit a new peak in FY26. "Next year, the tractor industry will touch a new peak with a good monsoon…There is a possibility of the new emission norms to come in from 1 April 2026. If that happens, there will be a lot of pre-buying that will happen for the old emission norm tractors both by customers and the channel. This means Q3 and Q4 of next financial year will see good pre-buying," he said.
The new emission norms, TREM-V, are likely to result in higher tractor prices. Because of this, a pre-buying trend is usually witnessed in the industry ahead of its introduction.
October Sales
Anticipating higher uptake in the months ahead, companies have pushed more inventory into the distribution channel in October.
Mahindra & Mahindra and Escorts Kubota recorded significant growth during October. Mahindra & Mahindra sold 30% more tractors in the domestic market to 64,326 units, while Escorts Kubota reported 22.6% growth to the highest-ever October sales at 17,839 units.
That said, retail data for October – as reported by Federation of Automobile Dealers Associations (FADA), does not show a major change.
For the industry as a whole, retail sales of tractors increased by 3% YoY to 64,433 units. However, rural retail sales of tractors dropped by 1.3%, while in urban areas tractor retail sales grew by 5.4%.
Among tractor manufacturers, 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 respectively. Retail tractor sales of Sonalika Tractors (International Tractors Ltd) also rose to 7,983 in October 2024 from 7,713, same month, last year.
John Deere, which has a market share of 9.13%, recorded 29% year-on-year growth with 5,884 units sold in October. CNH Industrial witnessed 4.6% growth in retail sales to 2,596 units, and Kubota Agricultural Machinery’s retail sales grew by 6.3% to 1,161 units.
On the other hand, Tractors and Farm Equipment Ltd’s (TAFE Ltd) retail sales remained almost flat at 8,767 units sold in October 2024, while Escorts Kubota’s tractor retail sales declined by 3.57% on year to 6,043 units, according to FADA data. The company’s retail market share stood at 9.38%. Eicher Tractors' retail sales also fell 13.5% year-on-year in October.