M&M expects tractor sales to grow 10% in FY17

Company is not as optimistic about automotive segment, as recent increase in taxes could dampen demand

Mahindra & Mahindra expects tractor sales to grow in double digits this year, if monsoon forecasts are proved right. The company, which met analysts earlier this week, said that tractor sales could grow 10 per cent in FY17, if the rainfall is normal this season. The tractor segment, which has declined for two consecutive years, could see some recovery due to pent-up demand in the system. Tractor sales have declined 13 per cent in FY15 and 10 per cent in FY16. Emkay Global, in a note, says: "After a successful launch of the Arjun brand tractors in the 50+hp range, the management is hopeful the recent launch of the 30-50 hp Yuvo range should further help market share."

The company is not as optimistic about the automotive segment's growth, as the recent increase in taxes could dampen demand somewhat.  Society of Indian Automobile Manufacturers has lowered the industry's growth estimates from 12-15 per cent to six-eight per cent for this year. The Street, however, believes that since the company launched nine products last year, the full impact of higher volumes will be seen in FY17. The KUV100 has been received well by the market and has a waiting period of six-eight weeks. The company had introduced 1.9-litre engines for XUV500 and Scorpio last year and the petrol versions will be rolled out within a year. Mahindra will have four petrol engines in all — 1.2 litre, 1.5 litre, 1.6 litre, and 2.2 litre. According to Nomura, "Things remain challenging in the near term, given higher taxes on diesel vehicles, continued stress in the rural segment, and expiry of fiscal incentives for the Haridwar plant. We believe the impact of good monsoons will lead to rural recovery largely in the second half of FY17."

The company also said that it would have to invest Rs 500 crore to meet BS-VI norms and its vendors will have to invest a lot more than that. The company estimates prices of BS-VI-compliant vehicles to increase Rs 90,000 to Rs 150,000 after all levies.