As demand outpaces supply, Oct tractor sales up 9 per cent over last year

Good monsoon followed by good crop have given a fillip to demand for tractors

Tractor sales, including exports, rose by around nine per cent in October 2020 to 1,23,883 units from 1,13,638 units, a year ago. Though growth has come down year on year, in absolute terms it increased.

Companies say demand has outpaced supply in October and festival season footfall has been good. Analysts at Crisil expect domestic tractor sales to notch up 10-12% growth this fiscal, compared with a de-growth of 1% estimated earlier, as a raft of tailwinds lifts farm incomes despite the Covid-19 pandemic.

Tractor and Mechanization Association (TMA) data shows, of the 1,23,883 sales in October 2020, 8,728 are exports as compared to 1,13,638 units, including 6,749 exports in October 2019. Production in October 2020 was 1,08,873 units as compared to 68,454 units, a year ago.

Hemant Sikka, President -Farm Equipment Sector, Mahindra & Mahindra Ltd. said, they continue to witness unprecedented retail demand which is likely to be higher than wholesale numbers on back of expectations of a higher Kharif output and good cash flow in the market. Auspicious festival days ahead, coupled with mechanisation requirements for ongoing Kharif harvesting and impending Rabi sowing season augurs well for the industry.

The company sold 45,588 tractors between both Mahindra & Swaraj brands in the domestic market during October 2020, a growth of 2% over last year. In the exports market, we have sold 970tractors, a growth of 23% over last year.

Escorts Ltd Agri Machinery Segment (EAM) in October 2020 sold 13,664 tractors, the company's highest ever October sales and registering a growth of 2.3 percent against 13,353 tractors sold in October 2019. Domestic tractor sales in October were at 13,180 tractors registering a growth of 1.1% against 13,034 tractors in October 2019.

Company said that despite operating at near-full capacity, the demand outpaced supply resulting in lower-than-normal inventories. Festival period of Navratri and Dussehra witnessed good footfalls, however sales even prior to that remained buoyant.

 

The demand is driven fundamentally because of higher crop production, good crop prices, sufficient availability of water and easy availability of finance. We expect demand momentum to continue and supply chain issues smoothened out in the next few months. Inflation in commodity prices remains a worry.

Higher volume and improved product mix will drive expansion in operating margin of tractor makers, supporting credit profiles, says Crisil

Good monsoon and higher crop production generally support farm incomes and provide a fillip to tractor demand. In the just-past rabi season, crop production surged a significant 7% on-year. This is reflected in the strong pick-up in tractor sales volume in the second quarter of this fiscal despite a sharp de-growth in the first quarter due to pandemic related containment measures.

Tractor volumes may continue to grow for the rest of this fiscal given good crop prospects over the medium term and timely government interventions. Good rains in June have facilitated early sowing and boosted kharif acreage. Further, a well-distributed and 9% above-normal monsoon season has meant reservoir levels surging to their highest in five years. That augurs well for the upcoming crop season.