Agri Business

USA, Europe and Asia are likely to remain the focal regions for long-term tractor exports

Domestic tractor sales reported an 8 per cent decline in May 2022 on a sequential basis though significantly higher than the second-wave hit May 2021. However, exports during the month grew both month-on-month and on a year-on-year basis. 

Total domestic tractor sales stood at 81,940 units in May 2022 as against 89,201 units in April 2022 and 55,609 units in May 2021, according to data provided by Tractor and Mechanization Association.  

While the tractor industry’s performance in May 2022 was better than expected, industry analysts stated that its  sales remained weak. The wheat export ban was also cited as a factor in the slowdown.  

“Strong tractor sales growth in April 2022 was driven by the expectation of good agricultural crop in the first half of this fiscal, assuming a normal monsoon, and an uptick in agricultural crop exports. But, an increase in tractor prices and continuing inflationary trends, as well as an increase in interest rates raising the cost of financing have had a slight impact on sales in May. That said, domestic tractor sales in April-May 2022 were still higher by 19-20% compared with April-May 2021,” said Anuj Sethi, Senior Director, CRISIL Ratings Ltd. 

Given the current trend, tractor makers are presenting a positive outlook due to favourable factors such as a consistent increase in MSP by the government, improved rabi crop procurement and now the timely arrival of monsoon. At the moment, OEMs expect single-digit growth for FY23. 

“We expect this growth rate to moderate in the balance portion of the year, as tractors will turn costlier, with further price hikes likely by players in order to cover the higher cost of inputs. Besides, funding will also become costlier, with interest rates also being increased again in June 2022. Overall, tractor sale volumes in FY23 are likely to be higher than that achieved in FY22, but moderately lower than the all-time high achieved in FY21. We expect volume growth to range from 0% to 2-3% in FY23 for the tractor industry,” said Sethi. 

Robust exports 

However, tractor exports grew to 11,582 units in May 2022 as compared to 10,715 units in April 2022 and 7,704 units in May 2021. 

USA, Europe & Asia are likely to remain the focal regions for long-term tractor exports. Also, with India emerging as an export hub for relatively small tractors (30-75 horsepower or HP), and major companies increasing focus on international markets with the launch of 90-120 HP tractors, sustainable export growth is expected over the next five years. 

Published on June 10, 2022