When the whole auto industry was reeling under the pressure of COVID-19 impact, the tractor segment was the only one that kept its wheels rolling. It recorded the highest ever sales at 899,407 units in the year of pandemic. In FY21, about 26.85% more tractors were sold than FY20, according to the industry data sourced by Mobility Outlook.
Industry experts are forecasting if the monsoons remain good in the next two years, the segment has the potential to touch one million units. From a data perspective, tractors will be at par with the SUV segment, which is aggressively growing for the past few years.
The surge in tractor sales can be largely attributed to a robust rural economy because of good Rabi and Kharif harvest last year.
India’s largest tractor manufacturer, Mahindra & Mahindra’s President, Hemant Sikka, said, “At Mahindra, we registered an 18% growth in FY21 in the domestic market over last year. This growth has been on account of several positive factors in the rural economy leading to the growth of the domestic tractor industry – successive bumper harvest, coupled with timely procurement of crops ensured seamless circulation of money in the rural economy.”
“It is worthy to note that this year we have had the third highest cumulative rainfall in 25 years, with the good temporal and spatial distribution. Good monsoons have also led to higher reservoir levels. As a result, the Rabi sowing is also very good,” Sikka added.
Other factors that have been the catalyst for growth in sales are government spending on agriculture and rural development. Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) outlay has also been increased substantially, and good price realisation for the farmer also played a key role.
The MSPs for 2020-21 were up from 2.1% to 12.7%, as compared to last year for Kharif and Rabi crops, according to the Directorate of Economics and Statistics,
The government has allocated INR 73,000 crore for MGNREGA, 34.52% below the Revised Estimate of INR 111,500 crore for 2020-21. Budgetary Estimate for 2020-21 was INR 61,500 crore. In 2019-20, INR 71,686.70 crore was spent on the programme.
Raunak Varma, Vice President & Country Manager India & SAARC, CNH Industrial, said, “FY21 recorded the highest ever domestic tractor sales of approximately nine lakh units, up 27% YoY. The robust performance was driven by a healthy monsoon, improved price realisation by farmers and relatively low impact of and faster recovery from COVID-19 in rural areas.”
Another critical reason he explained is the exodus of migrant labour during the pandemic accelerated mechanisation trends in the farm sector, leading to very high demand for tractors and harvesting equipment.
Commenting on the company performance, Varma said, “New Holland surpassed the industry growth with YoY growth of 37% to end the year with over 36,000 units and improving its market share. New model launches in the largest 41-50 HP segment, network expansion in key geographies and increased footprint of our retail finance arm helped outpace the industry.”
Similarly, Punjab-based tractor manufacturer Sonalika Tractors clocked 41.6% in FY21, which is the highest in the industry. Raman Mittal, Executive Director, Sonalika Group, said, “We have grown significantly amidst the most challenging year is a testimony that we have laid a strong foundation to remain closely knitted with our farmers and the society at large, which has only strengthened with time.”
Outlook: Tractor Sales To Remain Robust
India’s leading weather forecasting and agriculture risk solutions company, Skymet, says the upcoming monsoon to be ‘healthy normal’ to the tune of 103% (with an error margin of +/- 5%) of the long period average (LPA) of 880.6mm for the four-month period from June to September 2021.
Experts believe that with good monsoons and government spending, the rural economy continues to be strong. The tractor and Agri machinery industry to maintain strong growth momentum.
NB: Featured photo is representational.