After a sluggish first half, the domestic tractor industry is experiencing a strong resurgence, fueled by positive rural sentiment. Three days after M&M guided for a 15% jump in industry sales for the final quarter, rival Escorts Kubota has followed suit.
“Overall, year-to-date, in nine months, the industry has shown a growth of 5%. In the fourth quarter, we are expecting the growth to be almost 15%. So overall, I think for the full year, we will end up with 6-7% growth,” Bharat Madan, whole-time director and chief financial officer at Escorts Kubota, told Autocar Professional on Monday. This brings the forecast in line with M&M’s full-year projection of 6.0-6.8%.
The tractor industry achieved record-breaking sales in the financial year 2023, clocking sales of 945,000 units, a benchmark that is yet to be surpassed. The sales declined 7% in FY24 to 876,000 units on account of a high base effect as well as weak precipitation and uneven monsoons.
During the first half of the current financial year, the industry’s volume remained almost flat at 472,000 units, compared to 469,000 units sold in the year-ago period. “The first two quarters were almost flat or slightly negative. However, in the third quarter, we saw a 13% growth in the industry numbers,” Madan noted.
Factors such as robust monsoon precipitation, increased reservoir levels, higher kharif crop yields, and supportive government policies, including hikes in minimum support prices for rabi crops and rural development spending, are driving the momentum for the industry.
“The rural market is showing signs of recovery, and we expect the next few quarters to be favorable for the tractor industry,” Madan said.
“I believe that credit availability is likely to improve, as the farm credit card ceiling has been raised from Rs 3 lakh to Rs 4 lakh. Many farmers use this as a financing tool to purchase tractors, so this change will have a positive impact.”
On Monday, Escorts Kubota posted an 8.5% on-year rise in its standalone net profit for the quarter ended December to Rs 323.2 crore. This growth was driven by robust performance in its tractor business, despite challenges faced in the construction equipment segment. The company’s tractor volume during the quarter rose 4.5% on the year to 32,556 units.