Tractor Sales Set to Touch Record 9.75 Lakh Units in FY26; Rs 4,000 Cr Capex Cycle Ahead

21-4-2025: India’s domestic tractor sales are projected to reach a record 9.75 lakh units in FY26, reflecting a 3–5% increase year-on-year. This would surpass the previous peak of 9.45 lakh units achieved in FY23. The strong growth is driven by multiple factors, including an expected above-normal monsoon and higher minimum support prices (MSPs) for key cash crops. Additionally, there is a pick-up in demand from the construction sector.

Pre-Buying Ahead of TREM V Norms to Boost Tractor Demand

As per a report by CRISIL Ratings, pre-buying is likely to drive demand for tractors. This is because of the new TREM V emission norms, which will be effective from April 1, 2026. Tractor manufacturers are preparing for these changes, which are likely to result in price increases due to the requirements for emission control upgrades.

“Higher MSPs for key cash crops, along with increased construction activity, especially roads, backed by the government’s Union Budget allocation, should help drive 3-5% volume growth for tractors this fiscal,” said Anuj Sethi, Senior Director at CRISIL Ratings. The report also highlighted the forecasted rise in farmer confidence due to the expected monsoon, which is anticipated to boost rural sentiment and farm investments.

Capex Investment to Meet Emission Norms and Expand Capacity

The tractor industry is entering a Rs 4,000 crore capital expenditure (capex) cycle, aimed at expanding capacity and meeting stricter emission standards. The investment will enable the manufacturers to upgrade their technology and infrastructure in accordance with new emission norms.

“Tractor manufacturers have entered fiscal 2026 on a strong footing with stable margins of 13-13.5% due to softer input costs and sustained volume growth,” said Poonam Upadhyay, Director at CRISIL Ratings. The report indicates that tractor makers are well-positioned with low debt, strong cash flow, and solid liquidity, allowing them to invest in necessary upgrades.

With agriculture accounting for 70-75% of total tractor sales, the industry remains closely tied to farming demand. The rest of the sales are driven by construction-related activities, which are also expected to see growth in the coming fiscal year.

The growth in agricultural demand, construction activity, and technology investments is expected to drive tractor sales in FY26.

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