Domestic tractor sales report a 6% decline in FY22 even as exports zoom

Chennai, April 8

The Indian tractor industry has reported a six per cent decline in domestic sales in 2021-22, a year after registering highest-ever annual production and domestic sales. However, the industry achieved its highest-ever export volumes during FY22.

Total domestic volumes stood at 8,42,266 units for FY22 as compared to 8,99,407 units in the previous fiscal, a decline of 6.4 per cent. Total production also fell to 9,61,100 units compared with 9,65,231 units in 2020-21, according to the data provided by Tractor & Mechanization Association (TMA).

The decline in domestic sales in FY22 can be majorly attributed to the high base effect of the previous fiscal.

Other factors for the decline

“However, there are other factors that pulled down the sales during FY22. They include negative retail sentiments due to rising tractor prices amid price hikes taken by OEMs, higher inventory at the dealer’s end coupled with lower commercial demand, the rising cost of cultivation, increase in other expenditures (such as marriages and other social occasions) and advancement in tractor purchase (both new and replacement demand) by farmers in fiscal 2021,” Pushan Sharma, Director, Crisil Research.

However, buoyancy exports continued almost most of the part of the year and total exports stood at 128,636 units in FY22 as compared to 88,621 units in FY21, an increase of 45 per cent.

Exports up

Exports, accounting for about 13 per cent of the overall tractor sales, grew by 45 per cent on year in fiscal 2022 after recording a 17 per cent growth in fiscal 2021. Improved traction for Indian tractors in Bangladesh, the US, Mexico and European countries have supported export growth.

“Specifically, India’s export to Bangladesh has seen a sharp increase by 600 per cent from April-January 2022 as compared to the same period last year. The share of Bangladesh in India’s export basket rose from 12 per cent in FY21 to about 40 per cent in FY22. Also, exports to Mexico will witness a rise by about 650 per cent on year from April 21-January’22 and the share in the export basket rose from 2 per cent in fiscal 2021 to 6 per cent in fiscal 2022. Due to higher exports to Bangladesh and Mexico, which largely imports low HP tractors from India, the share of up to 30 HP tractors in total exports rose from 13 per cent in fiscal 2021 to 17 per cent in fiscal 2022,” said Sharma.

For March 2022, total domestic sales were higher at 72,888 units as compared to 51,953 units in February 2022, but lower when compared with 85,076 units in March 2021.

Though IMD is yet to come up with its monsoon prediction for 2022, a normal monsoon may drive low to moderate growth in tractor volumes in fiscal 2023.

“Record procurement of Kharif acreage, a substantial increase in exports of agricultural products like wheat, sugar and cotton will help improve the financial position of the farmers leading to better cash flow in the rural market to help boost tractor demand going forward,” said Hemant Sikka, President – Farm Equipment Sector, Mahindra & Mahindra Ltd.

Price hikes on cards

High inventory levels at dealers’ end, lower replacement demand and negative sentiments due to higher retail prices are expected to hammer demand in the first half of the fiscal. Price hikes to the tune of 2-4 per cent are expected to be taken by OEMs in Q1 FY23 to counter rising commodity inflation, said Sharma.

Published on

April 08, 2022

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