In 1998-99, M&M sold 69,362 tractors, a growth of 2.3 per cent compared with the industry average of 1.8 per cent. Eicher's tractor division sold 25,326 units in the same period (a growth of 4.4 per cent over last year), while Punjab Tractors sold 48336 units (19.6 per cent growth over last year). However, on a y-o-y basis, the growth has fallen -- from 18.13 per cent to 2.33 per cent for Mahindra & Mahindra; from 4.9 per cent to 4.43 per cent for Eicher Ltd; and, from 22.5 per cent to 19.6 per cent in the case of Punjab Tractors.

Apart from an apparent slowdown in demand growth, what makes matters worse is the increased competition, thanks to the entry of global players like New Holland and John Deree. And,with several Indian and global tractor makers setting up capacities in the next two years, the future looks bleak unless demand picks up.

Interestingly, until now, tractor was the only sector which had managed to buck the recessionary trend in the auto industry. But now, as the auto industry seems to be looking up, tractor producers are facing tough times. Mahindra & Mahindra has borne most of the brunt as the new entrants, both global and domestic, are concentrating on the higher-end of the tractor segment. Eicher, which is engaged in the lower end of the segment, has been hit primarily because of the shift in consumer preference. To that extent, Punjab Tractors, which focuses on the mid-segment range, is relatively insulated.

Mahindra & Mahindra, the largest tractor manufacturer in the country, makes a wide range of tractors from 25 horse power to 50 horse power engines (with direct/indirect injection diesel engines). The higher range (45 hp) is mainly for exports. At present, the company has a marketshare of around 27.2 per cent.

The company has recently entered the 25 HP category and successfully launched its product in Haryana. Eicher Ltd, which has a 60 per cent market share in this category, has now begun looking at the more lucrative 30-35 HP segment. Punjab Tractors, which has a 19 per cent market share, is engaged in the 30-35 HP segment. It is not surprising, therefore, that the company has seen a 30 per cent net profit growth in 1998-99. Its `Swaraj' brand of tractors is very popular in the rich northern belt.

According to analysts, the growth rate in the tractor industry, which used to be around 15-20 per cent slipped to around 3 per cent in the first few months of 1998-99. At present, it is less than 2 per cent. What used to be a sellers' market, is now a buyers' kingdom. Which is why manufacturers are going all out to woo potential buyers -- as a result, margins are likely to be affected. Besides, as the fortunes of the tractor industry is closely linked to agricultural production,tractor manufacturer are keeping their fingers crossed.