Tractor sales fall 14 pct in April-June quarter

Published: August 1, 2019 2:16:06 AM

Deficient monsoon, lack of optimum financing and weakness in farm sector incomes, owing to decline in average crop prices, dragged tractor sales by 14.3% year-on-year during the April-June quarter.

Major manufacturers, including Mahindra & Mahindra (M&M), Escorts and Sonalika reported a double digit decline in sales during Q1FY20, data by Tractors Manufacturers Association (TMA) showed.

By Pritish Raj

Deficient monsoon, lack of optimum financing and weakness in farm sector incomes, owing to decline in average crop prices, dragged tractor sales by 14.3% year-on-year during the April-June quarter. Analysts said the industry volume growth could remain subdued, impacted by late start as well as lower than expected monsoon in FY20. “Monsoon deficiency at the end of July 2019 was 12%, pan- India. Historically, deficit of 5% or more in two consecutive years impacts foodgrain production in India,” analysts at ICICI Securities noted. June 2019 marked the fifth consecutive month of decline in tractor sales.

Major manufacturers, including Mahindra & Mahindra (M&M), Escorts and Sonalika reported a double digit decline in sales during Q1FY20, data by Tractors Manufacturers Association (TMA) showed. Kotak Securities in a report said, till June 26, the deficit in rainfall was 36.8%, worst since 2014, when deficit was a tad higher at 38.4%.

As per a report by Icra, the third advance estimate of crop production indicates a decline in rabi crop output, coupled with poor kharif sowing. Rabi crop production declined by 3%. Experts said lower farm incomes and crisis in the NBFC sector has also impacted demand as over 70% of the tractor financing is done thorough them. Banks and other financial institutions have been cautious on auto sector lending post the defaults by companies like IL&FS and DHFL.

M&M, which commands over 40% market share, reported a 14.84% y-o-y dip in sales, while Sonalika and Escorts posted 17.4% y-o-y and 15.9% y-o-y decline respectively.While TAFE Group’s volumes fell 17.4%, others such as John Deere and New Holland reported a dip of around 10% y-o-y.

Tractor sales growth in FY19 halved at 8%, compared to 20% in the previous fiscal (FY18). While the tractor industry grew 18% in FY17, growth in FY18 stood at 22%. A high base was expected to impact the numbers slightly but the demand during the second half remained subdued and as a result the overall growth saw a downfall. “We believe the two key reasons for decline in tractor sales are agri crisis and high base,” analysts at ICICI Securities said.

Analysts at Nomura said tractor growth trajectory to remain weak on poor demand and high inventory.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.