Tractors see robust growth

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The healthy December sales volume is driven by rabi sowing season

The tractor industry in India, Asia’s third biggest economy, has witnessed a robust growth in volumes in the current fiscal with farm sentiments buoyed by reasonable rabi crop production during April-May, healthy monsoons as well as government support programmes.

The tractor industry has always been a barometer for the state of rural economy in India. Healthy monsoons supported improved kharif sowing as well as production (as per first advanced estimates) besides replenishing the reservoir water pan India, paving way for good winter crop.

“However, the growth momentum in monthly domestic sales was halted in November 2016, wherein the domestic volumes declined by 13 per cent on a year-on-year basis. But after the minor blip, sales volumes growth recovered in December, with leading original equipment manufacturers or OEMS reporting low double digit growth during the month,” Subrata Ray, senior vice-president at ICRA Ratings told Financial Chronicle.

The healthy sales volume growth in December could be driven by seasonal requirements on account of the rabi sowing season, even as farm sentiments remain somewhat subdued on account of liquidity constraints, he pointed out. “Our channel check with dealers and financiers points to mixed rural sentiments, despite several steps taken by the government to improve liquidity for farmers,” Ray said.

“This apart, various channel partners remain circumspect about the impact of the recent cash crunch on the quality of rabi sowing, even as the rabi sowing levels have remained healthy till now”, he added.

In this context, ICRA has an outlook of a low single digit decline in domestic volumes in the fourth quarter of FY2017, which would translate into 12-13 per cent growth in tractor volumes (domestic + exports) in FY2017.

In the long run, ICRA, however, continues to maintain a volume CAGR of 8-9 per cent for the industry over the next five years as long-term industry drivers remain intact.

“The government remains committed towards rural development and agri-mechanisation, a critical component in improving the state of agriculture in the country. Also, continued support towards enhancing irrigation penetration through fresh allocations would reduce rainfall dependence over long term. This coupled with other factors such as increasing rural wages and scarcity of farm labour is likely to aid growth in industry volumes over the long term,” Ray said.

Mahindra and Mahindra, India’s biggest tractor maker by sales, reported 9 per cent increase in total tractor sales at 14,047 units in December. The Mumbai-based major automobile had sold 12,868 units in the same month last year. In the domestic tractor market, Mahindra’s sales were up 8 per cent at 12,619 units in December as against 11,686 units in last December, the company said in a BSE filing.

However, exports during the month rose by 21 per cent to 1,428 units as compared to 1,182 units a year ago. “With good progress in rabi sowing and increased MSPs, we expect to see the growth momentum to continue in the coming months,” Rajesh Jejurikar, president and chief executive, farm equipment and two wheeler division at M&M, said.

Sales last month at Escorts Agri Machinery Segment last month, jumped 15.8 per cent to 3,187 tractors, up from 2,751 tractors it sold in December 2015. Escorts domestic tractor sales in December 2016, increased by 11.6 per cent at 3,043 tractors against 2,727 tractors sold in the same month in the year-ago period. Export for the month of December, soared 500 per cent at 144 tractors on a lower base of 24 units in December last.

Sales at Sonalika International Tractors rose a whopping 20.3 per cent in December to 5,169 units, up from 4,297 units it sold last year in domestic and international markets.

It posed a significant growth in sales volume by 18.3 per cent in domestic and 33 per cent in international market, with 4,080 units and 1,089 units respectively in December.

“The brand initiatives, strategies and after sale services have earned Sonalika a well-deserved success in the winter month sales. We have taken steps to increase our visibility and expanded our market reach while following a holistic approach to serving our customers for a better experience,” Raman Mittal, executive director at Sonalika ITL, said.

This has led it to grow its market share and sales volume against competing brands, he pointed out. He said the brand caters to 80 countries, including 24 European countries, with its range of 20HP to 120HP tractors made in India.

michaelgonsalves@mydigitalfc.com

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