NEW DELHI: Tractor makers are hoping to report growth in strong double digits for the first time in three years, even as demonetisation impacted rural demand adversely over the past three months.
Several tractor manufacturers ET spoke to said sales are likely to grow 18-19% to 5.8-5.85 lakh units by the end of this fiscal. If this comes true, it will be the second highest sales volume recorded in the domestic tractor market in a year after sales surged 20% to a record high of 6,34,151units in 2013-14.
"The cash crunch impacted demand and tractor sales in the industry dropped around 14% in November," said Shenu Agarwal, chief sales and marketing officer, Escorts Limited.
"Sales revived to an extent last month. We expect the market to improve and stabilise by the next harvest season. Monsoon has been good this fiscal, sowing has gone up and pices are holding well. Despite demonetisation, the industry should grow 18-19%," Agarwal added.
Between April and October 2016, tractor sales accelerated 25% over that in the previous year. After falling 14% in November, sales picked up in December to grow 7% over that a year ago.
"With good progress in rabi sowing and increased minimum support prices (MSPs), we expect to see the growth momentum to continue in the coming months,” Rajesh Jejurikar, chief executive-farm equipment at Mahindra & Mahindra had said earlier this month.
Raman Mittal, executive director at International Tractors, makers of Sonalika brand of tractors, said that post demonetisation banks and financial institutions prioritised collection as challenges in cash availability impacted repayments in the immediate aftermath of demonetisation. This affected new sales in the industry. The company, which sold 63,823 tractors in domestic and overseas markets till December this fiscal, expects its sales to surge at least 20% in 2016-17 over the previous financial year. Tractor sales in India declined 13% in 2014-15 over the previous year to 5,51,463 units, with poor monsoon whittling demand. Sales fell in 2015-16 as well, declining 11% to 493,764 units.
However, good monsoon and a pickup in infrastructure and construction activity in the first half of the fiscal prompted most tractor makers to revise upwards their sales growth projections for 2016-17 to 15-17% from the earlier 10%. Industry executives are hopeful of meeting this revised target for the entire fiscal.