Tractor sales rebound strongly in June on easing of curbs, robust farm economy

G Balachandar Chennai | Updated on July 02, 2021

Leading tractor manufacturers have reported a strong growth in volumes   -  Businessline

Despite increase in price, tractor makers see good sales momentum

The tractor segment bounced back strongly during June with close to 100 per cent month-on-month growth helped by easing of Covid-19 restrictions, record high agri output and better monsoon prospects.

In May, total domestic tractor volumes dropped by 8 per cent at 55,609 units against 60,441 units in May 2020. May 2021 volumes were down 12 per cent when compared with April 2021 sales of 63,422 units.

However, tractor volumes rebounded strongly in June as States across the country eased restrictions. Leading tractor manufacturers have reported a strong growth in volumes in June when compared with lockdown-hit May 2021 and June 2020. Despite price increase, tractor makers have seen a good momentum in sales after the lifting of lockdown.

Sharp recovery

Top tractor maker Mahindra & Mahindra, which had said that it was seeing sharp recovery in tractor demand in June, post unlock, reported a 31 per cent increase in its tractor sales at 46,875 units during the month when compared with 35,844 units in June 2020. It sold 22,843 units in May 2021.

“The sharp fall in Covid-19 cases and resultant easing of related restrictions, arrival of timely monsoon, increase in MSP rates for key Kharif crops and continued strong Government support to all agri activities is giving a very strong momentum to tractor demand,” said Hemant Sikka, President - Farm Equipment Sector, Mahindra & Mahindra Ltd.

Escorts’ tractor volumes grew 12.5 per cent in June at 11,956 units compared to 10,623 units in June 2020 and 6,158 units in May 2021.

The company said on-ground situation eased in June as the second wave of pandemic started diluting. Most of the dealerships, except in a few pockets, were able to remain open and serve customers, though for limited hours. Its inventory levels, both with the company and with the channel, continue to be at normal levels.

Rise in enquiry

Enquiry levels have improved faster in the tractor segment and the momentum is continuing. With the rural fundamentals in place, demand from agriculture remains strong. Commercial demand is picking up slowly with the opening up of the economy. Tractor inventory in the system is about 30 days, said an analyst at Motilal Oswal Financial Services.

Input material prices remain a major concern. Apart from cost control measures, companies are also effecting price increases to offset the spike in material costs.

Escorts has announced a significant price hike effective from July 1on all tractors. “This is our third consecutive price hike in the last nine months. Despite this, inflation continues to put pressure on the margins,” the company said.

Tractor makers, however, are optimistic for the rest of the fiscal year, as timely and expected above-normal monsoon, increase in MSP prices, and record direct procurement by the Government is leading to a positive build-up of farmer sentiments. Commercial activity is also expected to gain further momentum in the ensuing months. The enhanced pace of mass vaccinations will further help the rural sector.

Published on July 01, 2021

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