In FY’19 tractor sales grew by 10.24 per cent at 878,476 units as compared to 20.52 per cent and 15.74 per cent in FY’18 and FY’17 respectively. On a yearly basis the growth rate was almost halved in FY’19 over FY’18.
The growth was marred due to weak sentiment in later part of the year as sales slipped into negative in February and March 2019 on year-on year (y0y). This ensued into the fourth quarter performance posting a year on year decline of 5.78 per cent.
|Financial year||Total Sales||% Change|
Source: Tractor Manufacturers Association (TMA)Tractor sales that mirrors rural sentiment was struck due to erratic rainfall coupled with delayed sowing and low production of rabi crops in the last fiscal.
According to National Bulk Handling Corporation (NBHC) report, the rainfall during the June-September 2019 monsoon season in the country was ‘below normal’ with quantitatively 91 per cent of the long period average.
“Deficient northeast monsoon rains and dry conditions led to decline in sowing of Rabi crops by 4 per cent. Scanty rainfall resulted in significant fall in sowing areas of major crops in states of Gujarat, Maharashtra, West Bengal, Rajasthan, Karnataka, Andhra Pradesh, Telangana and Tamil Nadu,” NBHC report said. Low crop yield means dampened rural sentiment and reduced farmer income, which thereby means less expenditure on farm machinery and equipment.
Another report that tracked region wise sales of tractor pointed out that weak demand was observed majorly in the western and southern pockets of the country in FY’19. Volume in western states (including Gujarat and Maharashtra) declined by 8 per cent while it went up by merely 4.4 per cent in southern states, said Kotak Institutional Equities report.
In addition, report findings suggest that despite slowest growth, small tractor players’ hiked their market share in the last fiscal, squeezing the market share of the big ones.
Mahindra & Mahindra (M&M), the largest tractor maker in India experienced 1 per cent decline in market share to 40.2 per cent. Similarly, TAFE’s share contracted marginally by 0.2 per cent to 18.4 per cent.
“M&M and TAFE have lost 140 bps and 20 bps market share, respectively in FY2019 while Escorts and Sonalika have gained 110 bps and 40 bps share, respectively over this period. Smaller overseas players such as Kubota (+35 per cent yoy) and New Holland (+20 per cent yoy) have grown at a faster pace and have gained some market share. Mahindra has lost market share across all major markets except Bihar,” report added.
|Market share in FY’18 (%)||OEMs||Market share in FY’19 (%)|
|41.6||M&M (with PTL)||40.2|
|18.6||TAFE (with Eicher Motors)||18.4|
|17.3||Others (John Deere, New Holland etc)||17.5|
Source: Kotak Institutional Equities
The first long-range forecast for the south-west monsoon by the India Meteorological Department (IMD) signaled a positive market trends for FY19-2020 as it predicted near to normal monsoon for the current year. Despite this, analysts remain conservative as they predict a mere 5 per cent growth in tractor sales for FY’20.
“We expect a modest tractor volume growth at 4-5 per cent in FY’20, in the event of normal monsoons. However, the operating margins for most OEMs in the tractor industry are expected to remain at healthy levels, keeping in view the healthy capacity utilization levels,” said Rohan Gupta, Assistant Vice President of rating agency ICRA.