Q1 growth outlook is bright
Domestic tractor sales reported a rebound during the first month of this fiscal with a month-on-month increase of 22 per cent and a year-on-year increase of 41 per cent, supported by progress on the rabi harvesting and better price realisations for farmers’ produce.
The rebound comes after five consecutive months of y-o-y decline in domestic sales.
Total domestic tractor sales stood at 89,201 units in April 2022, as against 72,888 units in March 2022 and 63,422 units in April 2021, according to data provided by Tractor and Mechanization Association.
“Delay in rabi harvest due to delayed sowing had pushed the harvesting cycle from March 2022 to April 2022. Further, festivals in the first week of April like Gudi Padva, Navratri & Ugadi led to an uptick in retail delivery momentum, Hemal Thakkar, Director, Crisil Researchtold BusinessLine.
However, the wholesale growth has been much higher as compared to the retail growth on steep increase in raw material prices. Most OEMs have already or are going to increase vehicle prices by 1–3% between April & May 2022, he added.
This April, all leading players such as Mahindra & Mahindra, TAFE, International Tractors and Escorts witnessed a double-digit increase in their domestic sales.
Leading tractor maker Mahindra & Mahindra reported a 51 per cent growth in its April 2022 domestic sales at 39,405 units and Hemant Sikka, President–Farm Equipment Sector, Mahindra & Mahindra attributed the significant growth to the strong progress of rabi harvesting and higher prices for farmers’ crops in the open market than MSP.
Sonalika’s domestic sales grew 43.5 per cent to 10,217 units in April 2022, while Escorts reported a 20 per cent growth in its domestic tractor sales at 7676 units.
Does April’s rebound signal a revival in tractor demand? Industry representatives and analysts expect retail sales to be strong in Q1 of this fiscal due to better crop realisation as against MSP, the likelihood of a normal monsoon and timely sowing of Kharif crops amid inflationary pressures.
“Tractor demand for Q1- FY23 is expected to be strong as crop prices in the market are higher on-year due to increased demand and low supply. Also, global uncertainty especially for crops like wheat has kept domestic food grain prices elevated. Export of food grains momentum is also strong further supporting prices. This is expected to result in better farm income for farmers and thus tractor demand is expected to be good. However, going forward demand largely depends on the monsoon season and how well spread will it be across India,” said Thakkar.
The domestic tractor industry is expected to be flattish to marginally positive (low single-digit growth) in FY23 over a high base of previous years backed by the normal monsoon, good cash flow and continued support from the government. High inventory levels along with consistent price increases on account of ongoing geopolitical scenarios may restrict further growth in FY23.
Published on May 11, 2022