Tractor sales revive in festive season

Last Updated: Fri, Nov 30, 2012 03:21 hrs

Tractor sales have largely been depressed this financial year. A moderate increase in minimum support prices and high finance costs have largely contributed to the slowdown in tractors sales. The market was expecting a sales contraction of six-seven per cent in FY13, however, October has saved the day for most tractor manufacturers. Domestic sales remained flat year-on-year (y-o-y) at 68,301 units in October, while higher exports helped total sales grow 21 per cent to 73,557 units despite the higher base. The story is likely to be similar for November, too, given the festive season has been spread over two months. However, year-to-date tractor sales have declined by four per cent to 321,538 for the industry as a whole.

The market expects the decline in sales to be arrested. In fact, most analysts are modelling in a flat to modest growth in sales at the end of FY13. The sales decline was restricted in October, and this is likely to continue in the months to come as well. Brics Securities says tractor manufacturers expect delayed rains to result in a good rabi crop, which will help them achieve higher sales in the second half of the year in comparison to the first half. Also, analysts expect the government to increase sops to the rural sector next year, as it would be the pre-election year. This would improve the overall outlook for the segment. For the next financial year, analysts expect sales to grow seven-eight per cent.

However, October sales have not been uniformly good for all players. Some smaller players have done exceptionally well compared to others. For instance, while sales in October declined 14 per cent for Mahindra & Mahindra, 26 per cent for John Deere and four per cent for Escorts, TAFE, Sonalika, Swaraj and HMT posted robust growth.

Analysts say the long-term view on tractors remains positive for two reasons. While labour shortage in rural areas is increasingly pushing the smaller farmers to buy the sub-20 hp tractors, increasingly large farmers are upgrading to 50 hp tractors. Sales in the sub-20 hp tractors grew 148 per cent y-o-y in September and the total share of these tractors increased to three per cent in overall tractor sales. This segment is largely a duopoly, with M&M (Yuvraj) and VST Tillers. The 21-30 hp segment has seen the biggest decline.

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