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As rural blooms, tractors plough up record sales and output in October

G Balachandar Chennai | Updated on November 16, 2020

As the rural economy continued to be robust, October proved yet another bumper month for the tractor industry. Both domestic sales and production touched a historic high, surpassing the previous highs.

For the first time, tractor production crossed one lakh units in a month. The industry produced 108,873 units in October amid improved capacity utilisation of companies and inventory build-up for the festival season. In the previous month, the total production had stood at 99,523 units.

For the second consecutive month, domestic tractor sales crossed the one-lakh mark to reach 115,155 units last month as against 106,889 units in October 2019 and 108,585 units in September 2020, according to the data provided by the Tractor and Mechanisation Association. The previous high was achieved in October 2018 at 112,556 units.

“The rural economy continues to benefit from sustained tailwinds in the form of good rainfall (third highest in the past 25 years and about 9 per cent higher than the long-term average) and record kharif output,” Rajesh Jejurikar, Executive Director, Automotive & Farm Sectors, M&M Ltd, had said while discussing the company’s second-quarter performance last week.

“This will result in a 13 per cent rise in farm incomes. The government spend on agriculture and rural development continues. Also, high reservoir levels bode well for the upcoming rabi crop. So, the tractor industry is expected to maintain the momentum to post low double-digit volume growth for the current fiscal year,” he said.

NBFC Cholamandalam Investment & Finance Company Ltd (CIFCO) says that in addition to growth prospects, the repayment track record of tractor loan borrowers has been consistently very good and hence the company, which is a major lender to the commercial and used-vehicles, has been focussing on the tractor segment.

Diverse applications

“Progressively, tractors are also used for other applications such as construction and rural development,” D Arulselvan, Executive VP and CFO, CIFCO, told BusinessLine.

“The government’s focus on rural development helps people invest in tractors as they can rent out these machines for other uses as well. There may be some dip in sales during the non-season, but it will pick up again,” he added.

Rating agencies such as Crisil and India Ratings expect domestic tractor sales to record a growth of 10-12 for FY21 as against the earlier guidance of a marginal contraction.

Published on November 15, 2020

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