Despite falling sharply over the last three months, tractor sales may still register 8-10% growth this fiscal year at a record 5,30,000 units, thanks to a 20% rise in sales in the April-September half. However, declining crop prices and high cost of finance may further hit sales.
Farm commodities such as cotton, wheat, potato and onion have suffered price erosion, impacting the farm economy. “Cotton price is slashed by 61% while wheat is sold 15-20% below the minimum support price in the open market,” said Rohtash Mal, executive director & CEO Escorts, and president, Indian Tractor Manufacturers Association “This has triggered a fall in sales.”
In February, tractor volumes fell by 17% to 42,000. “The industry might show 7-8% growth, but we were earlier expecting 20% growth,” said Mal.
The two percentage point increase in excise duty will lead to higher raw material costs, which may result in another round of price hike for tractors, said Mal. Tractor companies have hiked prices by 3-5% in two phases in the current fiscal year owing to high input cost.
Tractor prices range from R3.3 lakh for 25 HP and R6.3 lakh for 60 HP. Most selling category of tractors of 30-40HP are sold at around R4.5 lakh per piece.
“High interest rate for tractor loans is a key reason,” said Sanjeev Goyle, senior vice-president, marketing, Mahindra Farm Equipment Sector. “Cost of labour too is impacting the farm economy. Despite all this, the tractor market still has potential to grow because of the growing need for farm mechanisation.”