Indian Tractor Industry Faces 5% Sales Decline Amid Agricultural Slowdown

The Indian tractor industry is projected to experience a 5% year-on-year decline in sales volume for the current fiscal year due to a slowdown in agricultural activity. This slowdown is attributed to factors such as delayed harvesting seasons, lower rabi sowing, and negative farm sentiment.

Mahindra and Mahindra (M&M), a leading player in India's tractor market, predict a sales figure of around 900,000 units by the end of the fiscal year, a decrease from the 945,000 units sold in 2022-23. Despite an industry-wide slowdown, M&M has managed to increase its market share from 41% to 41.8% in Q3FY23.

From April to January 2022-23, total domestic tractor sales stood at 760,000 units, compared to 800,000 units in the corresponding period of the previous fiscal year. Rajesh Jejurikar, Executive Director and CEO of Auto and Farm Sector at M&M, has indicated an anticipated 10% decline in tractor industry sales during the fourth quarter.

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M&M's consolidated farm revenues remained stagnant at Rs 8,600 crore in Q3FY24, with a 4% decrease in Profit After Tax (PAT) to Rs 898 crore for the farm business. Hemant Sikka, President of the Farm Equipment Sector at M&M, expressed that achieving a volume of 900,000 units for the full year is not alarming, and the outlook for FY25 appears optimistic. He highlighted the expectation of normal monsoons as a positive factor, stating that, based on the substantial growth of 26% in the industry during the previous year, 900,000 units is a respectable number.

Southern states are experiencing weaker demand for tractors, while states like Punjab and Haryana are exhibiting relatively stronger growth. M&M's farm business revenues remained stagnant in the third quarter, while profits declined by 4%. 

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M&M has also pointed out positive signs, such as higher mandi prices for key crops and a decline in farm input inflation, which have positively influenced farm profitability. Additionally, farm wage growth from July to October 2023 surpassed non-farm wage growth, indicating an increase in farm income.

Negative farm sentiment arises from low government spending on agriculture and rural development, coupled with erratic rainfall patterns negatively impacting harvests. Lower kharif output and sluggish rabi sowing further exacerbate the situation. Nonetheless, positive signs are evident in the form of higher mandi prices and declining farm input costs, potentially improving farm profitability. Additionally, farm wage growth exceeding non-farm wage growth suggests potential income growth in the agricultural sector.

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