By: Animesh Agarwal, COO, Tractor Junction
The Indian agricultural sector contributes nearly 18-19% to the GDP. The sector and its continuous growth are important as it is the largest employment creator in the country. There are roughly 13 crore farming households in the country but the total tractor population is only around 80 lakhs. This comparison gives a sense of how low the penetration is, and also on the other hand indicates the expected growth potential in this segment. The government on its part has been working on ways to improve the farm output and thereby doubling the farmers’ income. A stable and steadily rising output will help make farming a profitable business. It is pertinent to mention the role of the tractor and farm equipment segment that helps farm modernization and increases output.
The opportunity size
The Indian tractor market share size was valued at $7.5 billion in 2020 and is expected to reach $12.7 bn by 2030 growing at a CAGR of nearly 10% for this decade. As per an estimate, the pre-owned tractor is as big as that if not lower. If we add the revenue from financing these pre-owned tractors, and insurance it takes us to an astounding figure of $10 billion. A robust pre-owned market is important for the growth of all stakeholders.
Why the used tractor segment is important
Not all farmers can afford to buy the latest tractors and farm equipment. As nearly 86% of India’s farmers are small and marginal farmers with land holdings below two hectares. This is where pre-owned tractor and equipment becomes important as it provides the required goods at a lower cost. It helps save funds for marginalized, small, and medium farmers. While a new tractor is available for anywhere between Rs 5-8 lakhs for under 50 HP tractors, and Rs 6 lakh onwards for tractors above Rs 6 lakhs. A tractor with <3 year-old vintage can be brought for around 80% of the cost. In addition, a used tractor is a good purchase decision for any farmer who is trying out commercial applications with a tractor. He can start his business with a lower down payment and less burden of EMI and get the same work done.
Financing options for the used tractors
The government of India has been working relentlessly towards financial inclusion. Bank credit should reach the farthest and deepest corners of the country. The availability of easy credit gives a boost to consumption. Currently, there are more than 50 banks and NBFCs offering financing options in the segment of pre-owned tractors. This segment of lending is important, not only for pre-owned tractors but also for the rural lending segment given the sheer size and opportunity. The down payment too is a lot lesser compared to a new tractor, i.e. anywhere between Rs 50,000-1 lakhs compared to Rs 1.5-2 lakh for a brand new tractor.
The presence of organized players in the pre-owned tractor segment makes the exercise of choosing and buying a lot easy. Like in the case of passenger and commercial vehicles there are reputed players offering quality and assured vehicles along with the warranty, finance, etc.
Doorstep service and ample repair and maintenance facilities have increased interest in the used-tractors segment. Improving infra, connectivity, awareness of equipment and easily available information on maintenance will likely increase the market size of pre-owned tractors in India.
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