Tractor Industry to witness moderate growth in FY14

Volumes in the Indian Tractor Industry are expected to expand by 5%-7% in FY14, says rating major ICRA, an associate of Moody’s Investors Service in its latest release on Indian Tractor Industry. Growth estimates could be revised upwards, contingent on the timing and spatial distribution of 2013 monsoons, and its impact on the Kharif crop.

ICRA maintains a volume CAGR of 8-9% for the tractor Industry over the next five years as long-term drivers continue to remain favourable. Indian tractor industry has started the year strong with robust 31% YoY growth in sales in Apr-13, followed by healthy volume growth in May-13 as well. This volume recovery stands out in a backdrop of ~4% decline in volumes during Q4FY13, and virtually flat sales in Q3FY13. Recent buoyancy in tractor sales is a result of festivals like Gudi Padwa and Navratra falling in April, instead of March in the previous year; positive sentiments in farming community from a near-normal monsoon forecast for the current year; besides build-up of channel inventory by some market participants. Further, regions in South and West are also showing initial signs of turnaround, after witnessing flagging sales growth over the last five quarters.

While tractor sales declined as much as 3% in FY13, growth across different parts of the country was pretty un-even. Central region, comprising of Madhya Pradesh and Chhattisgarh was at the fore-front with 36% YoY sales growth in FY13, albeit on a small base; while Northern region, the largest tractor market of the country reported steady 10% growth. In contrast, South and West saw sharp volume contraction of 27% and 23% respectively, during FY13. Inter-play of growth variation across regions also impacted the market share of tractor manufacturers cited ICRA in the report. Among key players, market leader M&M was able to increase profitability, in spite of volume declines, supported by cost control initiatives and price increases to pass on cost inflation. Mahindra & Mahindra Ltd’s tractor sales numbers for June 2013, stood at 26,723 units in the domestic market, as against 22,493 units in June 2012, a growth of 19%. The company’s overall sales have also grown by 17% standing at 27,749 units during June.

Filed in: Road

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