Buoyed by good monsoons, the tractor segment has shown a growth of over 20 per cent even as the automobile industry bid good bye to one of the toughest year for the sector. The segment also shows promise for the future as the industry expects the growth to be good for at least the next 2-3 years on the back good consumer sentiment driven by better prices and crop production.
A. S. Mittal, Vice-Chairman of Sonalika Group, said, “Yes, there is an overall slowdown in the automobile sector but the tractor industry has grown 24 per cent this year over last year. Revival in demand from the farm segment has been led by timely and adequate monsoon precipitation for most parts of the country, higher MSPs and pent-up demand of 18 months.” The industry has been battling with demand de-growth, over capacity and production cuts for 18 months before demand started picking up in May 2013.
S. Sridhar, CEO, Escorts Agri Machinery, said after about six quarters (18 months) of a flat growth, the Indian tractor market was growing significantly, at about 20 per cent, since May 2013, mainly due to good monsoons throughout India.
“The customer sentiment is highly positive due to better prices and crop production, and we expect industry growth of upwards of 12 per cent. The outlook for the industry for another 2-3 years is positive,” he said.
President of Tractor Manufacturers Association of India T. R. Kesavan said the tractor sector as a whole in India had grown by 23.57 per cent as of end November 2013 in the current fiscal.
The industry was likely to be about 6,25,000 tractors this year in size and is expected to have a CAGR (compounded annual growth rate) of about 7 per cent over the next five years, he added.
Commenting on the outlook for the industry, Mr. Mittal said, “We expect the tractor industry to grow at around 12-15 per cent next year. Good monsoon precipitation ... and higher MSPs leading to higher farm incomes should provide good industry growth next year as well.” Long-term industry drivers also continued to remain favourable, he added.
“Government of India remains committed towards rural development and agri-mechanisation besides other factors like scarcity of farm labour, healthy credit availability, moderate penetration and shortening replacement cycle that continue to encourage demand for tractors,” Mr. Mittal added.
Mr. Kesavan, who is also the Senior Vice-President (Marketing & Product Strategy), Tractors and Farm Equipment Limited, said the outlook for the farm equipment industry remained positive as the market would increasingly move towards farm mechanisation.
“Currently, it is more into tractorisation with some amount of mechanisation in the harvesting and extensive mechanisation in land preparation.
“In future, given the scarcity of farm labour and its high cost, most farm practices will become mechanised,” Mr. Kesavan said.
Talking about the challenges faced by the sector, Mr. Kesvan said, “The major challenge is to bring in appropriate technology to address mechanisation needs in the large percentage of small and marginal farms of India where the farm size is below 2 Ha.”
Mr. Mittal said, “Credit availability and dependence on monsoons (lack of irrigation facilities except in Northern India) are the biggest challenges for the sector”.
