The Hindu Business Line : Southern demand drives growth in Q1 tractor sales

Tractor sales had grown by about 15 per cent to hit an all-time high of about 285,000 units in the last fiscal. This was also significantly more than the previous all-time high of 269,000 units in 1999-2000.

Interest rate cut

The fundamental reasons for the continued growth remain the same, namely higher return from crops and reduction in interest rates on tractor loans. In addition, the availability of easy financing for tractors has also increased, especially in the Southern States, said Mr R.C. Jain, President, Tractor Manufacturers Association (TMA).

Not surprisingly, the Southern States are emerging as a major driver for tractor sales growth.

While tractor sales in Andhra Pradesh almost doubled to 8,300 units during the quarter under review, compared to 4,300 units, sales in Tamil Nadu and Karnataka also saw brisk growth in sales.

In fact, the three Southern States had done extremely well in the last fiscal as well with tractors sales in Karnataka, Tamil Nadu and Andhra Pradesh growing by 68 per cent, 49 per cent and 24 per cent respectively.

The other States that saw high double-digit growth during the quarter were Gujarat, Haryana and Maharashtra.

Growth was lower in States such as Punjab, where farm mechanisation level is already very high.

Dip in M.P

Madhya Pradesh, however, saw a dip in sales primarily due to poor availability of financing.

"With the monsoon on track, we expect the growth in the tractor industry to continue. However there have been some recent instances of banks, including SBI, having reduced retail financing for tractors. If this situation is not addressed, it could impact the growth in the tractor industry," Mr Jain said.

Meanwhile, with the industry on a high, domestic tractor makers are busy ramping up capacities to meet demand.

According to a recent survey, domestic tractor manufacturers are set to invest Rs 1,067 crore over the next few years to enhance capacity.

Major expansion projects on the anvil include those by L&T John Deere, which is investing about Rs 360 crore, Sonalika and Escorts Ltd.