The Covid-19 pandemic triggered an acceleration in tractor sales in India which is expected to last beyond the festive season, industry insiders opined. Accordingly, the reverse labour migration due to Covid-19 from states such Punjab, Haryana and others has led to higher farm mechanization, cited sectoral analysts.
“Tractor sales have grown by around 5 per cent during April 2020 to August 2020. The solid rabi crop harvest and the expectation of a good kharif harvest on the back of adequate monsoon is largely driving the sales," said Shruti Saboo, Associate Director, India Ratings and Research.
“The total area sown under kharif crops has also increased by around 6.3 per cent (as on 4 September 2020) which is also adding to the demand for tractors."
According to the data furnished by The Tractor and Mechanization Association, last month, the industry had manufactured 86,999 units and sold 72,581 units out of which it exported 7,852 units.
In August 2019, the industry had manufactured 70,039 units and sold 44,030 units out of which it exported 6,980 units.
As a result, most manufacturers are running at almost full production capacity but still are not able to meet demand.
“OEMs have been ramping up production levels to ramp-up inventory ahead of the festive season and are gearing up for healthy sales for the rest of the year," said Rohan Gupta, Assistant Vice President, ICRA.
However, Suman Chowdhury, Chief Analytical Officer at Acute Ratings said: “It may be noted that such a growth comes on a lower base in the previous year and also is a reflection of pent up demand subsequent to the lockdown."
“The sustainability of such demand growth will also need to be seen in the remaining part of the fiscal year."
Besides, analysts pointed out other factors such as government support in the form of increased minimum support price for kharif crops, increased budgetary allocation under MGNRES as being supportive of the demand uptick.
Industry player Mahindra & Mahindra’s Farm Equipment Sector President Hemant Sikka said: “On the back of highest ever sales in July, we have clocked yet another highest ever sales in August. The tractor industry growth continues to remain strong in August. This is primarily on account of continued positive sentiment, due to increase in kharif sowing area, thereby indicating a bumper harvest, bountiful monsoon, good rural cash flows and base effect."
“We expect rural sentiments to remain positive and translate into robust tractor demand as we move into the festive period."
Comparatively, the trend in tractor sales is in stark contrast to other mobility segments.
“The only bright side in the automobile sector over the last 6 months despite the pandemic has been the tractor sales which seems to be at its best of health," said Sridhar V, Partner, Grant Thornton Bharat LLP.
“Good monsoon, robust rural economy, bumper harvest and support from government to the farm sector through various policy initiatives are helping see a renewed vigour in the sector and tractor sales."