Tractor sales are likely to witness slowdown in the next financial year (2014-15) after seeing a robust performance in the current fiscal year, as untimely rains in several parts of the country over the past one month coupled with higher base could spoil the show.
The industry, which saw a growth of over 20% in FY14, is expected to witness a slower growth of 8-10% in the next fiscal year as unseasonal rains and sudden hailstorms have destroyed crops in states like Madhya Pradesh, Maharashtra, Punjab, Haryana, Andhra Pradesh, Gujarat and Rajasthan. According to the agencies, lakhs of acres of farmlands have been destroyed in these states.
"We were confident of a growth of 12% in the coming financial year. However, things have changed over the past 15 days. We expect the growth to come down to 8% in FY15. Clear picture will emerge in a month's time," said S Sridhar, CEO of Escorts Agri Machinery.
"While winter rains are good for crops, these are not really winter rains. If this continues, automatically it will damage the crops. So what was expected as a year of bumper crops, looks like we are going to see a problem," said Sanjeev Goyle, Sr. VP, marketing and head Applitrac (a business unit) for the farm equipment sector at Mahindra & Mahindra.
However, industry players are confident that the sales would not be as bad as it was in FY13, when the industry witnessed a 0% growth. "The monsoon forecast by the international agencies looks normal or slightly below normal for the coming year. We are waiting for the national agencies to come up with their forecast," said Sridhar.
The current financial year (FY14) has been a very good year for the tractor industry with sales of over 6 lakh tractors, an additional 1 lakh units over FY13. The reasonably good spread out of monsoon across the country has helped in driving tractor volumes during the year.
Experts also pointed that the upcoming elections might also have a marginal impact on the buying sentiment. "When elections happen, because of the code of conduct, subsidies on farm equipment purchase are not provided. Hence overall subsidies get hit, and obviously it does not impact positively for the industry. Also rural India generally is passively involved in politics, which affects the productivity. However, it may not have a huge impact on sales as such," said Goyle.