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Tractor sales growth pace hits three-year low in FY’19

Tractor sales growth pace hits three-year low in FY’19

    Tractor sales growth pace hits three-year low in FY’19

The growth was marred due to weak sentiment in later part of the year as sales slipped into negative in February and March 2019 on year-on year (yoy).

30 May, 2019

New Delhi: The Indian tractor industry witnessed a double-digit growth for the third consecutive year in the financial year 2018-2019, however, the pace was slowest in the last three years.

In FY'19 tractor sales grew by 10.24 percent at 878,476 units as compared to 20.52 percent and 15.74 percent in FY'18 and FY'17 respectively. On a yearly basis, the growth rate was almost halved in FY'19 over FY'18.

The growth was marred due to weak sentiment in the latter part of the year as sales slipped into negative in February and March 2019 on year-on-year (YoY). This ensued into the fourth quarter performance posting a year on year decline of 5.78 percent.


Financial year Total Sales % Change
FY'17 661,195 15.74
FY'18 796,873 20.52
FY'19 878,476 10.24

Source: Tractor Manufacturers Association (TMA)

Tractor sales that mirror rural sentiment were struck due to erratic rainfall coupled with delayed sowing and low production of rabi crops in the last fiscal.


According to National Bulk Handling Corporation (NBHC) report, the rainfall during the June-September 2018 monsoon season in the country was ‘below normal’ with quantitatively 91 percent of the long period average.

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"Deficient northeast monsoon rains and dry conditions led to a decline in sowing of rabi crops by 4 percent. Scanty rainfall resulted in a significant fall in sowing areas of major crops in the states of Gujarat, Maharashtra, West Bengal, Rajasthan, Karnataka, Andhra Pradesh, Telangana, and Tamil Nadu," NBHC report said. Low crop yield means dampened rural sentiment and reduced farmer income, which thereby means less expenditure on farm machinery and equipment.


Another report that tracked region-wise sales of tractor pointed out that weak demand was observed majorly in the western and southern pockets of the country in FY'19. Volume in western states (including Gujarat and Maharashtra) declined by 8 percent while it went up by merely 4.4 percent in southern states, said Kotak Institutional Equities report.


In addition, report findings suggest that despite slowest growth, small tractor players’ hiked their market share in the last fiscal, squeezing the market share of the big ones.


Mahindra & Mahindra (M&M), the largest tractor maker in India experienced a 1 percent decline in market share to 40.2 percent. Similarly, TAFE’s share contracted marginally by 0.2 percent to 18.4 percent.


“M&M and TAFE have lost 140 bps and 20 bps market share, respectively in FY2019 while Escorts and Sonalika have gained 110 bps and 40 bps share, respectively over this period. Smaller overseas players such as Kubota (+35 percent YoY) and New Holland (+20 percent YoY) have grown at a faster pace and have gained some market share. Mahindra has lost market share across all major markets except Bihar,” the report added.


Market share in FY'18 (%) OEMs Market share in FY'19 (%)
41.6 M&M (with PTL) 40.2
18.6 TAFE (with Eicher Motors) 18.4
10.7 Escorts Ltd (Farmtrac + Powertrac) 11.8
11.8 Sonalika 12.2
17.3 Others (John Deere, New Holland etc) 17.5
100 Total 100

Source: Kotak Institutional Equities

The first long-range forecast for the south-west monsoon by the India Meteorological Department (IMD) signaled a positive market trend for FY19-2020 as it predicted near to normal monsoon for the current year. Despite this, analysts remain conservative as they predict a mere 5 percent growth in tractor sales for FY'20.

"We expect a modest tractor volume growth at 4-5 percent in FY’20, in the event of normal monsoons. However, the operating margins for most OEMs in the tractor industry are expected to remain at healthy levels, keeping in view the healthy capacity utilization levels," said Rohan Gupta, Assistant Vice President of rating agency ICRA.
Source: Economic Times


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