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Table of Contents
Long term demand
Competition & players dynamics
Tractor sales to register strong growth in 2017-18 with near-normal monsoon
CRISIL Research expects domestic tractor sales volumes to continue growth momentum from previous year, and increase by 18-20% in 2017-18, on the back of a second consecutive near normal monsoon (5% below Long Period Average) and favorable farm sentiments. Rainfall distribution has been uneven, with floods and excess rains in Bihar,Gujarat, Rajasthan, and Tamil Nadu, while droughts in Uttar Pradesh, Punjab, and Haryana. However, with sufficient irrigation cover in drought-prone areas, and price support from various state governments, farm income expectations remain positive, despite high base of 2016-17. Moreover, with back-to-back normal monsoons, thefinancial situation of farmers has improved compared to the stress faced during droughts in 2014-15 and 2015-16. Farm loan waiver announcements in key markets of UP, Maharashtra, and Punjab has also provided the impetus to tractor demand in these states. While commercial demand has slowed down, with increased governmentregulation on illegal mining activities, continued focus on rural development road construction and rural electrification has helped support non-farm demand. Tractor sales to further improve by 11-13% in 2018-19 over the high base this fiscal, with assumptions of a normal monsoon and increased government support.
Long-term growth of 8-10% expected
The long term tractor industry CAGR from 2016-17 to 2021-22 is expected to be 8-10%,revised from the earlier forecast of 9-11% from 2015-16 to 2020-21. The forecast alsotakes into account possibility of 1-2 deficient rainfall years during this period.
Governments renewed thrust towards improving the rural economy, via measures suchas doubling farm income by 2022, increasing spend towards irrigation, and improvingcrop productivity by distributing soil health cards is expected to drive growth in the longterm. This will also be supported by other measures like the e-NAM (National AgricultureMarket), expanding crop insurance, and gradual spread of Custom Hiring Centres. Withgrowth in rural wages also decelerating, and increasing mechanization on farm fields, thisbodes well for structural tractor demand growth.