Q2 Domestic Tractor Sales Decline by 6% Due to High Base and Inconsistent Monsoon

In a tale of contrasting fortunes, the Indian tractor industry experienced a challenging second quarter in the fiscal year, marked by a notable 6 percent drop in total domestic volumes compared to the same period in the previous fiscal year. However, as the calendar flipped to September 2023, there were signs of recovery with a strong month-on-month increase. The data, as reported by the Tractor & Mechanization Association (TMA), revealed that total domestic tractor sales in September stood at 96,934 units, in stark contrast to the 1,13,686 units sold during the same month in 2022.

The tractor industry's subdued performance during Q2 of 2023 can be attributed to various factors, including a high base set by record sales in the previous fiscal year and an uneven monsoon that left farmers exercising caution when considering new tractor purchases. Additionally, the postponement of the festival season to the third quarter contributed to the decline in sales.

Saji John, Senior Research Analyst at Geojit Financial Services, commented on the industry's performance, saying, "The reason for the underperformance was a high base and an uneven monsoon, which has led farmers to be more cautious about buying new tractors. In addition, the postponement of the festival season to Q3 has also contributed to the decline in sales."

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Despite these challenges, the industry experienced a notable uptick in September 2023, with domestic volumes reaching 96,934 units. This was a substantial improvement when compared to August 2023, which saw domestic volumes at 53,249 units.

Two major players in the Indian tractor industry, Mahindra & Mahindra and Escorts Kubota, both reported an 11 percent decline in domestic tractor volumes in September 2023. Mahindra & Mahindra's sales stood at 42,034 units, while Escorts Kubota sold 10,114 units. Escorts attributed the decline to the postponement of the main festival season to the December quarter, which had a direct impact on September's sales.

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For the second quarter ending on September 30, 2023, total domestic tractor sales amounted to 208,766 units. This represented a 6 percent decline compared to the same period in the previous fiscal year, where 221,588 units were sold. Production and exports also saw a year-on-year decline during the quarter, with production at 274,009 units (compared to 304,864 units in Q2 of FY23) and exports at 25,857 units (compared to 35,274 units).

Looking at the broader picture for the first half of the fiscal year, total domestic sales reached approximately 4.7 lakh units, a slight decrease from the 4.9 lakh units in the same period the previous year.

However, there is a reason for cautious optimism within the industry. Tractor manufacturers have built up inventories in anticipation of a strong festival season. With improved rainfall in September and the likelihood of a good Kharif harvest, along with positive macroeconomic factors and farmers' sentiments, the industry expects growth momentum to pick up in the festival months of October and November, possibly extending throughout the rest of the fiscal year.

Hemant Sikka, President of the Farm Equipment Sector at Mahindra & Mahindra Ltd, expressed hope for the industry, saying, "Normal rains in September have helped the overall monsoon to achieve near normal levels and this will help in Rabi sowing, especially in Central, Northern, and Western regions of the country."

Nonetheless, it is expected that the tractor industry will conclude the fiscal year with muted growth due to the high base set in the previous year, when record tractor sales were achieved. Additionally, below-normal and erratic monsoons across the country may continue to pose challenges to tractor demand in this fiscal year.

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