For the current March quarter, the tractor market leader has forecast a 10% decline for the industry. India’s tractor market — a proxy for the country’s rural economic health is nearly 2.5 times of China and 3.5 of the US. Nearly 9.5 lakh tractors were sold domestically in 2022-23 and 4 million cumulatively in the last five years.
“The rural economy is under stress. The sentiment is more negative than what we expected,” said Rajesh Jejurikar, executive director, farm equipment and automotive sectors at Mahindra & Mahindra said at a press briefing after December quarter results. He cited weak government spending, uneven rainfall distribution, low reservoir levels and weak mandi arrivals of kharif crop as the key reasons. Negative farm sentiments are also seen in the slow progress of rabi sowing, he noted in his presentation.
However, he pointed out positive signs underlining higher mandi prices of key crops and declining farm input inflation that positively impacted farm profitability. Farm wage growth during July to October 2023 was higher than non-farm wage growth indicating growth in farm income, he noted.
Mahindra’s December quarter tractor sales declined 4.1% to 101,000 units while the domestic tractor volumes for the industry fell 4.9%. Lower tractor sales singed the company’s farm equipment sector.
Revenue from the farm business was flat at Rs 8600 crore in the quarter against Rs 8585 crore a year ago. Profit before interest and tax fell 9% to Rs1051 crore from the year ago period. However, despite the headwinds, its market share rose to 41.8% from 41% earlier.The muted demand has also jacked up the company’s inventory at its sales channels to “slightly above 30 days,” Jejurikar said. Meanwhile, some of the company’s light commercial vehicles that sell in rural markets have also seen some impact though the Bolero, which has a large exposure to the rural market, continues to be in great demand.
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