After a stellar performance in the financial year 2022-2023, the domestic tractor industry is in for a muted show in the ongoing fiscal. This year, the risk of El Nino conditions looms that may hamper the crop yield. Despite this backdrop, companies like Mahindra & Mahindra (M&M) and Escorts expect tractor sales to slow down to low single-digit growth in FY24.
For the uninitiated, EI-Nino is a climate pattern that describes an unusual warming of surface waters in the eastern tropical Pacific Ocean and may lead to less rainfall. It occurs on average every two to seven years, and episodes usually last nine to 12 months.
In the last financial year, the domestic tractor industry grew by 12.2 percent year-on-year to a record number of 9.45 lakh units as compared to 8.4 lakh units in the previous year. All macroeconomic factors such as crop production, crop prices, good monsoon, and availability of retail finance remain positive throughout the year.
However, tractor players are sanguine and believe the overall volume will witness an uptick on the back of government spending ahead of the elections and good MSP of crops. According to Rajesh Jejurikar, Executive Director and CEO, Auto and Farm Sector, M&M, the terms of tractors have improved and the positive aspects have been good reservoir levels, and a good rabi crop.
“There are many positive enablers. One key is substantial reservoir levels. The second one is we see government spending in rural and agriculture go up throughout this year, especially as we’re leading into an election year and the Rabi crop has been very good and Mandi prices are decent. Fortunately, a recent IMD report also stated that there will be positive rain which will be an enabler to sentiment, which helps tractor buying. So our estimate for tractor demand for FY 24 is low single digits,” Jejurikar said at a recent media press conference in Mumbai.
The company has gained 41.2 percent of market share in the whole of FY23 at 404,000 units and it is looking to further increase its tractor market share with the introduction of a new platform for light-weight tractors from Swaraj in FY24.
“On the Swaraj side, we did a lot of work around the channel and efficiency that has resulted in us getting market share. That gives us confidence in adding new products and segments in which we are not present. Swaraj’s upgrade will be significant and it will be aggressively marketed; we will see more of that in August and September. We are also coming up with Swaraj lightweight series in 25 and 29 HP tractor portfolios on June 2,” Jejurikar added.
Along similar lines, Bharat Madan — Whole Time Director and Chief Financial Officer of Escorts doesn’t see a significant impact of monsoon this particular year because of the reservoir levels across most areas, which are key markets for the company, being reasonably good.
“Ahead of general elections, we expect infrastructure spending to double this year as compared to the previous years. So, the haulage, plus the mix segment which accounts for close to 30 percent of the total industry, is expected to give a big boost to that particular entire space. This combined with expected growth in agriculture led by MSP increases as well as irrigation, and water reservoirs is indicating single-digit growth for the overall industry,” he said over a conference call.
However, Madan opined that sales in the first quarter of FY24 will remain flat due to preponing of festivals in March 2023, The company closed FY23 with 10.1 percent market share as compared to 10.3 percent in FY22. The loss in market share was primarily due to a muted Q1FY23, after which the company has witnessed a sequential gain in market share every quarter.