Tractor sales rally drops in April but experts hopeful of a bounce back

Tractor sales in India lost steam in April, dropping for the first time in 10 months, but experts and manufacturers said they expect a rebound after the fresh wave of Covid-19 infections subsides.

Retail sales in April were down by 40-45% from the preceding month, according to data from Crisil, as lockdowns were imposed in several parts of the country to check a massive surge in Covid-19 infections.

The decline in wholesale was narrower at 20-25%, as manufacturers increased channel inventory which was running low after months of high sales.

Despite this, wholesale in April 2021 was higher than that in April 2019 by about 17%, indicating a lower impact on tractor demand compared with other automobile segments. April 2020 was an abnormal month due to large-scale lockdowns to arrest the spread of Covid-19 and, hence, cannot be compared with.

“Assuming the spread of Covid-19 does not intensify further in rural areas, we believe sales lost in the month of April will come back in the subsequent months, as was seen in the previous fiscal,” said Hetal Gandhi, director, Crisil Research. “In fact, the current rabi harvest remains on schedule with about 82% of wheat sown being already harvested as of April-end.”

As per Crisil’s estimate, domestic tractor demand could grow by 3-8% in FY22.

Hemant Sikka, president for the farm equipment sector at Mahindra & Mahindra, the market leader in tractors, said all agriculture-related fundamentals remain strong with a bumper rabi crop harvest and forecast of a normal monsoon this year.

“We expect that tractor demand will bounce back as farmers start preparing their land for kharif crops in the ensuing weeks,” he said in a statement.

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Mahindra and Mahindra’s wholesale in April stood at 26,130 tractors for the domestic market compared with 29,817 in March. Escorts, the other listed tractor maker, said its wholesale was about 6,386 units, down from 11,730 in March.

Industry stakeholders expect the ongoing demand downturn can help component makers catch up with demand and build buffer stocks. The sharp rise in demand for tractors over the last one year had resulted in component makers running out of capacity. Tractor sales in FY21 grew by 26% over the preceding year to a record high of about 899,000 units, generating revenue of Rs 48,500 crore.

The record volume was aided by two consecutive years of above-normal monsoon rains, which happened for the first time since 1960. Major crops saw higher yields and the realisation on farm produce was high at 12%, leading to higher disposable income in the farm sector.



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