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Tractor Manufacturers Association reveals that tractor sales grew 15 per cent to 97,597 units in the April-June 2016 quarter compared to the same period last year.

Tractor Manufacturers Association reveals that tractor sales grew 15 per cent to 97,597 units in the April-June 2016 quarter compared to the same period last year.
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Data released by the Tractor Manufacturers Association reveals that tractor sales grew 15 per cent to 97,597 units in the April-June 2016 quarter compared to the same period last year. The industry witnessed a decline in sales of over 10 per cent in the last fiscal and 13 per cent in 2014-15. According to data, 4,93,764 tractors were sold in the domestic market in 2015-16 compared to 5,51,463 units in 2014-15. The last two years have seen farmer incomes and expectations battered by poor rainfall.

Says Subrata Ray, senior group vice president, ICRA, “The farm sentiment has also been alleviated by expectation of a healthy monsoon season; the progress in monsoon on a pan-India basis has remained satisfactory till now and largely in line with expectations.”

Another long-term plus for the tractor industry is the growing geographical spread of tractor use. The perception that boisterous folks from Punjab and Haryana bursting into songs have a monopoly over tractors is no longer supported by data. For tractor companies, south and east are emerging as major growth centers of future. 

In the quarter ended June 2016, southern India witnessed a phenomenal growth of 58 per cent and eastern India a very healthy 24 per cent uptick. In contrast, the two largest markets, Punjab and Uttar Pradesh, registered a decline in sales. 

According to Raman Mittal, executive director, Sonalika ITL, there are multiple factors leading growth in the two regions. “First, the monsoon arrived early in southern and eastern region. Development work and government’s help in the state of Telangana, Andhra Pradesh, West Bengal, Bihar are driving sales,” says Mittal, adding that Sonalika is looking to increase its market share in the southern region. 

The tractors sold in the eastern and southern regions primarily belong to 35-50 hp categories whereas agri-rich states demand higher engine capacity tractors. 

But the poor state of farm incomes and unreasonably high interest rates continue to cast a shadow over the sector. More than 15 per cent of tractor loans disbursed in 2014 and 2015 were overdue for more than three months as of March 2016.

A recent India Rating study shows that while tractor sales were pushed without adequate growth in farm incomes, tractor loans turned costlier. Average interest rate on tractor loans rose from about 17 per cent in 2010 to over 21 per cent in 2014-15. While tractor loans were 8-10 per cent costlier than average home loans in 2010, the spread rose to 12-13 per cent since 2014. 

Mittal says, “Tractor buyers are very price sensitive. A good forecast gave them hope that they can earn well so they are investing their money. A negative forecast wouldn’t have encouraged them to do otherwise.”

The ICRA report says the absence of significant growth in irrigated area exposes several regions to the risk of erratic rainfall. “Even after a favourable monsoon this year, chances of a complete recovery in tractor loans and farm output may get hampered if the next monsoon is not favourable,” the report says. 

The country still lags an irrigation system that can support the rural economy in times of inadequate rainfall. A fall in the level of rainfall next year is certain to impact the industry. 

Just like the two-wheeler and four-wheeler sectors, the tractor sector is also very competitive with more than half a dozen players. Mahindra & Mahindra is the market leader, constituting about 38 per cent of industry volumes. Mahindra has eaten into second-largest manufacturer TAFE’s share in its stronghold -- the southern region. Apart from these two, other major manufacturers are John Deere India, Sonalika International Tractors, New Holland, Escort Agri Machinery, HMT Tractors and Force Motors. 

John Deere India, the local arm of US-based John Deere Global, is eyeing an overall market share of over 10 per cent in the next three years, against 6-7 per cent today. Sonalika which became the third largest player by surpassing Escort is looking to have a market share of 15-16 per cent in the next 3-4 years. Pune-based Force Motors is also focusing on the tractor segment where it has a marginal market share of 1 per cent. 

Even as tractor companies battle it out, the significance of this recovery cannot be underestimated. If rural India grows, the impact on the economy as a whole would be immense. Besides, going back to Bollywood and music again, the image of tractors would transform from Bhangra to ‘Mile Sur Mera Tumhara’ — the patriotic song popular in the 1980s. 
 

Source:- Businessworld.in

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