India: Tractor sales grow by 28% y-o-y in Sep'20

Tractors registered the highest y-o-y growth in September 2020, with registrations in India showing a growth of 80.4% in Sep'20 against the sales of Sep'19. Total tractor sales stood at 1, 08,649 units, up 28.4% as against sales of 84,639 units in Sep'19.

The market sentiment continues to be highly positive for majority of OEMs who registered double-digit growth in tractor sales Sep'20 sales on the back of good monsoons favorable Kharif season, crop prices holding up well and good supply of retail finance in the rural areas.

As a result, tractor companies like Mahindra, Escorts and Sonalika are increasing shifts and clearing supply chain snags to hit 100% utilization both for domestic and export sales. They are ramping up their production capacity hoping the sales spike to continue beyond the festival and harvest season.

Owing to demand slowdown, tractor factories were working on a single or 1.5 shifts at best for 18 months. With the numbers picking up, factories are seen moving to two or three shifts to hit 100% capacity utilization. Currently, the capacity is 9.5 lakh units on a two-shift basis but the companies are also ready to go to three shifts if the demand holds up.

• Mahindra Farm Equipment domestic sales in the past month stood at 42,361 units, up from 36,046 units sold in Sep'19.
  
  

• TAFE Tractor and Farm Equipment sales increased 38% y-o-y to 19,973 units in Sep'20, up from 14,472 units sold in Sep'19.
  
  

• Sonalika Tractors - the Hoshiarpur based tractor maker has reported sales of 16,000 units in Sep'20, up 51.4% as against 10,571 units sold in the same month of the previous year.
  
  

• Escorts Limited also reported a 10.54 percent increase in Sep sales. Sales which stood at 10,521 units in Sep'19 increased to 11,453 units in the past month.
  
  

• John Deere and New Holland also noted increased sales along with that of Kubota Tractors. Kubota sales increased 0.2% to 1,275 units in Sep'20. The company had forged an alliance with Escorts Limited early last year and has announced local manufacture of the Kubota MU4501 (45 HP tractor) 2WD which is already on sale in India. Thereby, benefitting both the companies and extending the tractors reach in the country by local production.
  
  

• Other tractor OEMs on the list that included VST Tillers, Preet, Indofarm, Captain, and ACE all noted positive growth in the past month while sales of Force and SDF dipped 7.8% and 42.1% respectively.
  
  

Outlook

The Government of India has passed three agricultural bills in parliament and the sector is clocking a 3.4% rise in Q1 2020-21. The demand trajectory is most likely to continue to remain healthy in coming quarters, courtesy positive farm sentiment, backed by a good Rabi harvest, remunerative crop prices, return of farm labourers , adequate water table levels, ongoing normal monsoon progress and expectations of a strong Kharif output has also contributed to an increased buyer sentiment in rural markets.