Agri Business

Tractor volumes decline in May as rural sales take a hit

G Balachandar Chennai | Updated on June 10, 2021

But industry players optimistic of demand revival

Domestic tractor volumes saw a decline both year-on-year and month-on-month during May as the second wave of Covid-19 and the resultant localised lockdowns in rural areas affected sales.

However, declining daily new cases in the past one week and the start of monsoon and other favourable factors provide a hope for revival of demand soon.

During May, total domestic tractor volumes stood at 55,609 units compared with 60,441 units in May 2020, posting a decline of 8 per cent. The drop was 12 per cent when compared with sales of 63,422 units in April 2021, according to the data provided by Tractor and Mechanisation Association.

During the first wave, most of the semi-urban and rural areas were insulated from the impact of the virus and hence when the lockdown was lifted tractor sales started to pick up helped by pent-up demand and strong government focus, record agri output and favourable monsoon.

Sluggish demand

“This time the situation didn’t appear to be like last year. There have been a lot of restrictions imposed in rural markets and States extended stringent lockdowns at the regional level in the past couple of months and thus demand remained sluggish,” said Raman Mittal , Executive Director, International Tractors Ltd.

The number of cases in rural regions is much higher this time compared to the peak seen last year, and health infrastructure in these regions is also limited.

“While this could impact tractor sales in the first quarter of fiscal 2022, agriculture income is likely to remain healthy given good rabi crop and healthy mandi arrivals seen in April and May. Also, expected normal monsoon and better reservoir levels, will support agriculture income for the rest of the fiscal as well,” says Anuj Sethi, Senior Director, Crisil Ratings Ltd.

Manufacturing challenges

On the manufacturing front, there could be minor challenges on the supply chain initially in the first quarter of this fiscal. Also, companies are looking to adopt different processes due to absence of oxygen heating process in fabrication works as industrial units had to divert their oxygen production to support Covid-hit patients.

As the daily new infections have come down significantly in the past couple of weeks, industry representatives express optimism over demand revival.

“It is heartening to see the Covid cases reducing sharply. This is leading to sharp improvement in farmer sentiments and green shoots of recovery are visible. A bumper rabi harvest, record procurement, food prices holding up, gradual opening up of Mandis and expectations of a normal monsoon will pave the way for growth in the upcoming season,” said Hemant Sikka, President-Farm Equipment Sector, Mahindra & Mahindra Ltd.

On a low base of Q1 last year and expected recovery in demand during July-September, tractor sales are expected to be still higher during the first half of this fiscal.

“Overall, we expect tractor demand to grow at 3-5 per cent overall in fiscal 2022, supported by higher agricultural incomes and recovery in non-commercial demand for tractors (basically for moving goods, people and construction material about 30-35 per ent of tractor demand). The non-commercial tractor segment witnessed some sluggishness last year, said Sethi.

Published on June 09, 2021

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