Tractor sales gain traction, signal turnaround

CHENNAI: It could be the first green shoots of a revival of sentiment. After a miserable 2012, the tractor industry is in top gear in the first two months of the new fiscal. According to latest data by the Tractor Manufacturers' Association of India, tractor sales grew 30.19% in April and nearly 21% in May — a huge jump from the 2% drop it recorded in the April 2012-March 2013 period.Tractor marketers say a good monsoon, higher minimum support price and a general sentiment upturn has brought about what looks like a genuine turnaround. And if the next few months keep the good news rolling, the positive sentiment can spill over on to other sectors as well including consumer durables and two and four-wheelers.
Top tractor companies reported smart growth in the first two months of the fiscal. Said Rajesh Jejurikar, chief executive, tractor & farm mechanization, Mahindra & Mahindra: "We clocked a 38% growth in April and 24% in May so it's definitely a turnaround. Overall there is positive sentiment about the rains which coupled with the higher minimum support price for wheat and a good soya crop last year -- which fetched decent price -- has helped build positive sentiment. If June continues to be good, we will revise our yearly estimate upwards from the 6-8% growth that we had announced earlier this calendar year."
Agreed Sonalika group chairman L D Mittal: "It is definitely a turnaround and if this continues overall growth for the industry should not be less than 20%." Sonalika clocked 36% growth in April and May and is looking at June to continue the demand spurt. "Last year the monsoon was erratic but this year it seems to be on time so things are looking better," added Mittal. "Financial assistance to the farmers has also improved, land values have gone up and there is now more money in rural India so demand for other goods may also go up," he said.
Tractor marketers agree the good news from rural India could mean better demand for consumer durables as well as automobiles, both two wheelers and four. "We are right now seeing positive sentiment which can have an overall positive impact on demand," said Jejurikar.
Industry experts say the good news is that the growth has not been patchy or restricted only to one or two companies. "The sales growth has been homogenous. Combined sales growth for us is around 26% in the two months of this fiscal as against nearly 25% industry growth," official sources at Tractors and Farm Equipments (TAFE) said. Tafe, he said, grew 32% by volume in April and nearly 20% in May. Going forward the growth in sales could be sustained if the monsoon rains hold up, he added.