Tractors report a double-digit decline in February; exports stay buoyant

Chennai, March 11

Domestic tractor sales continue to be sluggish as February month saw a year-on-year decline of 31 per cent and a marginal fall on a month-on-month basis. However, exports stayed buoyant at 10,000+ unit levels

Given the current trend, the tractor industry is expected to end FY22 with a high single decline in domestic sales and a strong double-digit growth in exports.

In February 2022, total domestic sales stood at 51,953 units when compared with 75,645 units in February 2021 and 52,767 units in January 2022.

The first two-quarters of this fiscal have been good for domestic tractor sales. But the third quarter saw a double-digit decline of 13.5 per cent at 2.24 lakh units. The fourth quarter of the previous fiscal witnessed a huge increase of about 63 per cent in volumes over Q4FY2020. Due to this high base, industry volume will see a decline in Q4 this fiscal year.

Unseasonal rains impact sales

The fall in volumes in recent months is attributed to late monsoon, the delayed harvest of Kharif crops impacting rural cash flows and the high base effect of last year.

“The domestic tractor industry has been witnessing a downward trend in the past few months mainly on account of poor farm sentiments. Farm income from Kharif cropping cycle 2021-22 has been impacted due to unseasonal rainfall resulting in crop damage in certain regions coupled with an impact on crop quality. Further, input cost for farmers has increased for the rabi cropping cycle 2021-22 along with an increase in vehicle cost which has hurt farmer sentiments. All these factors together have resulted in sluggish agricultural sentiments thus impacting demand for tractors, said Hemal Thakkar, Director, CRISIL Research.

For the 11 months of this fiscal, total domestic tractor sales stood at 7,69,378 units when compared with 8,14,331 units in April 2020-February 2021 period, posting a decline of 5.5 per cent. In FY21, total domestic sales stood at close to 9 lakh units.

On the export front, tractor shipments for the 11 months of this fiscal grew at 50 per cent at 1.17 lakh units.

“Tractor exports are expected to witness strong growth for the second consecutive year. Demand for Indian tractors has been higher in the US, Bangladesh and European countries. Further, strategic plan, such as setting up bases in foreign countries, by players to cater to the global demand is also expected to push export sales,” said Thakkar.

Outlook

However, higher Rabi sowing, improved liquidity in hands of farmers and higher reservoir levels are expected to spur domestic demand in the coming months.

“Agri indicators continue to be promising with Rabi sowing at an all-time high and higher liquidity with farmers on account of timely and record procurement of Kharif crops. With record expansion in the sown area for the third consecutive Rabi season, we are optimistic for an all-time high crop production level. Additionally, Governments’ focus on increasing cropping intensity of summer crops will bring in additional income in the hands of the farmers,” pointed out Hemant Sikka, President - Farm Equipment Sector, Mahindra & Mahindra Ltd.

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