In August 2021, the Indian tractor industry experienced a mixed trend. While exports reached a new high and total production remained above one lakh for the second month in a row, domestic sales fell during the month.
The total domestic tractor production in August 2021 was 1,05,422 units, the highest monthly total in 2021. This is the third time this calendar year that monthly tractor production has surpassed one lakh.
Tractor exports continued to soar, with total exports reaching an all-time high of 11,760 units. In addition, tractor exports surpassed 10,000 units for the third month in a row in 2021.
However, sales in the domestic market appear to be moderating, with total domestic sales in August 2021 standing at 53,721 units, compared to 64,729 units in August 2020 and 65,216 units in July 2021, representing a 17% year-on-year decline and a 17.6% month-on-month drop, according to Tractor & Mechanisation Association (TMA) data.
Domestic sales fell due to the higher base effect, according to industry representatives. In addition, price increases by tractor manufacturers appear to have had an impact on demand.
Mahindra & Mahindra M&M, the world’s largest tractor manufacturer, reported a 15% drop in domestic sales in August to 19,997 units, compared to 23,503 units in August 2020, but exports increased by 43% to 1,363 units.
However, Escorts continues to see strong farmer sentiments and an increase in inquiries, owing to favorable macroeconomic factors, reasonably good reservoir water levels, a good pace of Kharif sowing, and continued government support in the agriculture sector. Total domestic sales were 348,367 units from April to August 2021, up 19% from 293,022 units the previous year.
‘Domestic tractor volumes in August 2021 were lower than expected and fell by double digits as a result of subdued customer sentiment in some monsoon-deficient states. Despite a strong start to the year, the volume may fall in FY22 due to a high base and lower government subsidies,’ according to an Emkay Global Financial Services report.
As of now, the tractor industry is still forecasting growth in the low to mid-single digits this fiscal year, compared to a strong growth rate of 28% (the highest rate in the last ten years) last year.