Find a Dealer

On Road Price

Tractor, two-wheeler sales in rural India get monsoon, festive season boost

tractor news

283

A good monsoon has set the cash registers ringing at tractor and two-wheeler firms over Navratri and Dussehra, making it the best festive season for some in the past three years.

But consumer packaged goods firms haven’t seen the desired offtake, with a broad-based recovery from the effects of demonetisation and the goods and services tax (GST) continuing to elude their channel partners. 

“An early onset of the festive season has helped,” said Rajesh Jejurikar, president, farm equipment sector, Mahindra and Mahindra Ltd. 

Unlike last year when key Hindu festivals of Navratri, Dussehra and Diwali fell in October, this year the first two were celebrated in September.

This added to positive sentiment, spurred by a good monsoon and a healthy crop yield in rural India.

 

Mahindra’s domestic tractor sales in September grew 52% to a record 44,000 units over the same month a year earlier.

The India Meteorological Department (IMD) on 30 September said the monsoon was 95% of the long-term average compared to its forecast of 98%, Reuters reported last Saturday.

Responsible for delivering about 70% of the annual rainfall, the monsoon season is critical for the farm sector that accounts for about 15% of India’s $2 trillion economy.

A strong sales performance across all the tractor companies helped overall tractor volumes advance a brisk 50% during the month, over the last year, said Benaifer Jehani, director research at Crisil Ltd.

While demand is strong, the impressive sales volumes also reflect the very high levels of dispatches being organized by tractor firms in order to make the most of the festive season, she said.

 

Tractor makers, such as automobile firms, count dispatches to dealers as sales.

“The buildup of stocks at the dealerships is humongous in anticipation of a good festive demand,” she said, adding that she expects some correction in the current month. 

The festive season has been equally impressive for motorcycle and scooter makers.

Honda Motorcycle and Scooter India (HMSI) Pvt. Ltd, the second largest two-wheeler maker, has all its factories running at peak capacities. On the first day of Navratri, HMSI retailed 52,000 scooters and motorcycles. 

Cumulatively, ending with Dussehera, it sold a total of 100,000 units in 10 days, said Y.S. Guleria, HMSI senior vice-president (sales and marketing). This is the best for the company in three years. A lot of it was led by an aggressive network expansion in rural and semi-urban areas where the demand is strong and the company has ability to meet it, he said. HMSI sells four out of every 10 two-wheelers in rural markets.

Hero MotoCorp Ltd, the two-wheeler market leader, is equally bullish.

“With close to two weeks still remaining in the festival season, we have set an all-time record by selling over a million motorcycles and scooters in domestic retail sales in the festive period so far, further consolidating our market leadership,” Ashok Bhasin, head of sales, marketing and customer care at the firm said in an email. Hero draws half of its total sales from rural India.

Crisil expects tractor sales for the festive months from September to November to expand by 12-16% from the year-ago period as the high base effect of the previous fiscal kicks in.

However, the festive season has been dull so far for makers of oils, shampoo, soap, chocolates and other daily consumables.

Some have flagged the lagging effects of demonetisation and the impact of the GST rollout on wholesale channels as obstacles to rural recovery.

“The rural market has been evolving every year. The region buys more of the gifting and premium portfolio of Cadbury’s chocolates,” said Hemant Rupani, sales director, Mondelez India Pvt. Ltd, owners of Cadbury.

He added that although sales have been decent, they are yet to take off in a big way. 

“The wholesale piece (part of the business conducted via wholesale channel) has been upset by the GST,” Rupani said, adding that the rural market performance “could have been better” given that a slew of government schemes to improve rural infrastructure were expected to boost rural demand. 

In an investor presentation in September, India’s largest consumer packaged goods company, Hindustan Unilever Ltd, said that its growth in rural markets lagged in fiscal 2016-17—falling behind urban markets for the first time since 2011-12.

Citing data from market research firm AC Nielsen, it said consumer sentiment has fallen steadily since 2011-12. 

Analysts said a large part of this depressed demand is the patchy monsoon and lower kharif crop sowing that came right after demonetisation in November last year.

Monsoon rains this year were deficient by 5% as of 22 September, said a report by investment bank Morgan Stanley on the same day.

By state, rains were deficient in some of India’s largest consumer markets including Uttar Pradesh, Madhya Pradesh, and Punjab.

Consequently, sowing of rice, pulses and oilseeds declined by 1-9% year-on-year, it added. All these are expected to impact consumer demand.

In a report dated 22 September, equities brokerage firm JM Financial had said that these “channel related issues”, particularly among wholesalers and in the north and the east, will make rural demand recovery a “more gradual affair” even though “the end consumer is quite oblivious to these changes”.

Mahindra’s Jejurikar said rain-deficient states such as Uttar Pradesh have good irrigation cover—as much as 80% and  should make up for the shortfall.

Therefore, it’s unlikely to adversely impact farm output. Mahindra has maintained its growth forecast of 10-12% for the tractor market for the full year.

Source- http://www.livemint.com

Advertisement

loder image