It’s a field day for tractor industry as domestic sales surge in April-Nov period

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Even as the other segments of the auto sector have been on a bumpy road, the tractor industry has grown 16 per cent in the first eight months of this fiscal. The sector saw domestic sales cross at 6,00,092 units in April-November 2020, against 5,18,973 units in the previous-year period. It is further set to end the fiscal with a historic high volume.

During the Diwali month of November, domestic tractor sales grew 51 per cent to 82,330 units, against 54,432 units in November 2019, according to data provided by the Tractor & Mechanization Association (TMA).

The November growth was led by market leader Mahindra & Mahindra (M&M), which reported a 55 per cent increase in domestic tractor sales at 31,619 units (20,414 units in November 2019).

Hemant Sikka, President – Farm Equipment Sector, M&M, said rural sentiments remained positive on account of higher kharif output and rabi sowing. Procurement operations for kharif are in full swing, which will keep the rural cash flows healthy.

Also, the government’s focus on rural growth continues and its outlay will provide further fillip to the industry, he added.

While November sales were high, they fell short of the industry expectation of over 1 lakh units, in line with the September and October numbers, which had averaged 1.1 lakh units.

Sequential growth

“Tractor volumes continued to report a strong growth on a YoY (year-on-year) basis, with initial estimates pegging the overall growth (domestic plus exports) at about 48 per cent in November 2020. The volumes declined on a MoM (month-on-month) basis, with volumes in October supported by the festival season,” said Subrata Ray, Group Vice-President – Corporate Ratings, Icra Ltd.

Industry experts and representatives expect the sales momentum to continue for the rest of this fiscal in view of robust rural economic growth.

“The outlook for kharif output remains healthy; early rabi sowing coupled with healthy reservoir storage also bolster the outlook for agricultural growth in H2 FY21. Accordingly, the farm cash flows and sentiments are expected to remain healthy and support tractor volumes,” said Ray.

NBFC Cholamandalam Investment & Finance Company Ltd (CIFCO) said it will continue to focus on the tractor segment due to a positive outlook and good track record of borrowers.

“Since this is a bit of off-season for tractors, there could be some marginal moderation in sales. But it will pick up again from January. We will continue to focus on this segment,” said D Arulselvan, Executive VP and CFO, CIFCO during an interaction with BusinessLine.

In FY20, domestic tractor sales had fallen 10 per cent at 7.09 lakh units (7.87 lakh units in FY19).

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