The tractor sector bounced back strongly in July with exports hitting historic high. Domestic sales too recovered with year-on-year growth.

The tractor industry is sticking to its growth guidance of single digit for the current fiscal as the second half may see some moderation due to high base effect and reduced replacement demand. However, the industry is not seeing anything negative on the ground so far.

As the pent-up demand remained robust last month, the total tractor production stood at 104,308 units, which was the second highest monthly production number in this decade. Exports stood at 11,187 units, which was the highest-ever monthly export number.

Total domestic tractor sales stood at 65,216 units in July compared to 63,137 units in July 2020 and 45,571 units in July 2019, according to data provided by the Tractor & Mechanisation Association (TMA).

For the April-July 2021 period, total domestic tractor sales grew 29 per cent at 2.95 lakh units compared with 2.28 lakh units in the year ago period, while exports more than doubled to 37,847 units compared to 18,316 units in April-July 2020 period. Total tractor production zoomed to 3.53 lakh units compared to 1.92 lakh units.

“Tractor retails already above pre-Covid levels in July. With IMD forecasting a normal monsoon during August-September period, sowing operations will pick up gradually. This will have a rub off effect on rural sales especially in the tractor segment,” said Vinkesh Gulati, President, of FADA (Federation of Automobile Dealers Associations).

Top tractor maker Mahindra & Mahindra pegged outlook at low to mid-single digit growth for the industry for the current fiscal. The company said South India has been performing better, while monsoon has now progressed in the North and East as well.

Demand bullish

“Demand remained buoyant in July as crop sowing operations gained traction with monsoon picking up pace across all the regions. Easing of Covid curbs and robust farm incomes on account of record Rabi crop procurement has bode well for the rural economy. We continue to stay bullish on tractor demand in the coming months owing to revival of monsoon, hike in MSP of key Kharif crops an upcoming festival season,” said Hemant Sikka, President - Farm Equipment Sector, Mahindra & Mahindra Ltd.

Escorts, India’s fourth largest tractor maker, also maintains tractor industry growth outlook for this fiscal at low to mid-single digit level.

Macro factors (monsoon progress, crop production and procurement levels, etc) remain supportive but high installed base is viewed as a limiting factor for the industry, the company management said at the Q1FY22 conference call.

Frequent price hikes by tractor makers in order to pass on raw material price increases are reported to be causing a delay in purchase decision or conversion of enquiry into sales. However, price hikes have not had a meaningful impact on volumes yet.

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