Domestic tractor sales decline 5% YoY in October due to uneven rains and last year’s high base

Mumbai: Tractor sales in India—a proxy for the well-being of the rural economy, dropped for the second month in a row from last year as uneven rains dented demand. Tractor makers also attributed the drop in sales to a high base effect catching on and a delayed festive period.

Led by Diwali, which begins with Dhanteras later this month, manufacturers expect sales momentum to return in the current month. Advancing for four straight years from FY20, tractor sales in India ended FY23 with a record 944,000 units, up 12% YoY.

Domestic tractor sales in October dropped 5% to 1,17,714 units from 1,23,526 units in the same period a year ago, according to data from Tractor Junction, an online aggregator for tractor and farm equipment.

September-November is the peak period for tractor sales as farmers harvest their kharif (post-monsoon) crops, while preparing to sow for the next season. If the kharif crop output and prices are good, they would be encouraged to invest in tractors for the coming rabi planting season.

However, the country’s rice production – which is the main kharif crop – is estimated to drop 3.79% to 106.31 million tonnes in the kharif season of the 2023-24 July-June crop year due to poor rainfall in key growing states, according to the agriculture ministry’s latest estimates.

“The rural demand is a running concern. The government’s projection of the lower kharif crop (rice) output only mounts the concerns. The decline in tractor sales for the last two months and year-to-month is an indication of stress. I don’t see the situation in rural India improving unless something dramatic happens in the next couple of months,” said Madan Sabnavis, chief economist at Bank of Baroda.Tractor volumes in the world’s largest market for such farm vehicles also dropped 7% year-to-month from to 6,44,555 units from 690063 units in the corresponding period. However, Amrit Sagar Mittal, president Tractor Manufacturers Association, is not worried. “All the fundamentals that drive tractor sales are very much in place. We expect November to be much better.”Mittal expects domestic tractor sales to end FY24 with a 5% growth YoY. The last quarter of the year will make up for the decline in the last two months’ sales. Among other factors, the firm commodity prices will be a key factor, he said.
Hemant Sikka, president, farm equipment sector at tractor market leader Mahindra & Mahindra, shared his optimism. “Higher aggregate kharif production, higher minimum support price for key Rabi crops and government’s continued support to the agri economy in the second half of this year are leading to positive sentiments among farmers during the on-going festive season, supporting tractor demand.”

Rajat Gupta, founder Tractor Junction attributed the decline to factors like uneven rain and cash flow fluctuations and the high base of the previous year. “This is only a temporary challenge for the industry and with upcoming festivals in November and strong demand seen on our platform, we anticipate a 7-10% industry growth in the current month.”
With the exception of Tafe Group, which saw a 2% year-on-year growth in October, sales at rest of the manufacturers including Mahindra & Mahindra, International Tractors Ltd, Escorts Kubota, John Deere fell in low single digits from the year ago period.

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