Mahindra & Mahindra Ltd.’s (M&M’s) Farm Equipment Sector (FES) in May 2020 sold 2% more tractors in India at 24,017 units compared with the 23,539 units sold in May 2019.
This is despite issues associated with the lockdown to contain the spread of COVID-19. Total tractor sales (domestic and exports) during May 2020, however, were slightly lower at 24,341 units against 24,704 units, down 1.46%.
This was on account of the 72% decline in exports because of logistical issues and problems in export markets. In May 2020, the company could export only 324 units against 1,165 units in May 2019.
Hemant Sikka, president, FES, M&M, said, “The timely relaxation of the lockdown for the agricultural sector helped ensure the speedy recovery of tractor demand during May 2020.”
“In the near term, farmer sentiment is likely to remain positive due to several developments, including a robust rabi crop production, higher procurement, good price realisations and the forecast of a normal monsoon that bodes well for a good kharif crop. All these augur well for tractor demand going forward,” he said.
“With reservoirs being much above the long period average last year, the winter crop saw a 10% increase in sowing. Despite challenges owing to labour unavailability as well as unseasonal rainfall towards the end of March and early April, we are expecting a bumper rabi harvest this year,” said Hetal Gandhi, director, Crisil Research.
“With farmers realising payments for the rabi crop, we are seeing some pent up demand leading to buoyant tractor sales compared with other automobile segments,” she said.
“The pent up demand is also owing to unrealised sales during festivals such as Gudi padwa and Ugadi which coincided with the beginning of lockdown 1.0. It is also important to note the top 25 clusters (34 districts), that have almost 70% of COVID cases, account for less than 10% of tractor sales, hence tractor retail sales have been less impacted by the lockdown compared with cars that have more than 25% of retail sales from these clusters,” she added. According to industry analysts, this segment witnessed good demand due to various factors such as an excellent rabi harvest, resulting in a strong cash flow in the rural market.
“Good reservoir levels, forecast of a normal monsoon, along with the government’s focus on the agri sector, related to mechanisation, liquidity, infrastructure and market linkages were the key factors that led to the growth,” said an analyst asking not to be named because of his company policy.
“An increase in rural and agri spends on core schemes by the government should also augur well for the industry. The industry will ramp up production through the month, as the supply chain opens up,” the analyst added.
Meanwhile, Escorts managed to hold ground by selling 6,454 units in India compared with the 6,488 units sold in May 2019, a drop of 0.5%. However a 59% decline in exports dragged down total sales down by 3.4%.According to analysts the rural growth story will continue.