Scanty rain makes tractor cos eye non-agri mkt

Indian tractor makers have started readying their retail strategies as the biggest season of tractor buying in the country is expected to go dry this year. The period, starting from September to November, sees close to 60% of the total sale of tractors. However, this year the period is expected to be affected by the delay in the monsoons. Tractor makers have thus set their eyes on the expected demand from non-agricultural sectors, including construction and haulage, arising out of the increased government investments announced in infrastructure to make up for the lowered agricultural demand. At present, more than 50% of a tractor's use is employed in non-agri work.

"The sentiments will be low in the coming season of tractor buying, due to the delay in monsoons. It will all depend on how tractor makers push retail strategies to make the farmers buy tractors. The farmer will, in turn, look at postponing its buy to the next season (March-June)," said Gopal Krishna, head, marketing and exports, Same Deutz-Fahr Group. He added that since 80-85% of the buying is through financing, tractor makers would do well to make easy financing options available to farmers.

"Typically, in the first quarter, banks are busy recovering the loans. Also, this year general elections had forced the banks on a rather less active mode. Therefore, it will be cracking the financing bit that can make the makers convert some potential buyers into actual ones," he added. The sale in October (around Navratri) is seen as a benchmark for the industry.

Indicating that a reduction in prices is unlikely, Anjanikumar Choudhari, president, farm equipment sector, Mahindra and Mahindra, said that like all manufacturers of goods, including consumer durables, there may well be attractive promotions, including limited and temporary price offs, during the festival period ahead. "There has been a fairly good stability in material prices in the last few months but there are signs of hardening in prices of commodities used as tractor components. The raw material costs for the tractor industry may therefore, move upwards to some extent in the second half of this fiscal," said Choudhari. The prices of tractors are expected to remain stable at the current levels, which hover between Rs 3.5 to Rs 8 lakh. Choudhari, also the president of Tractors Manufacturers Association, also added that the delay in monsoons will have a marginal affect on the sales of the tractors, while for the whole fiscal it would be reasonable to expect a year-on-year growth of 6-8%.

The Indian tractor industry has seen a growth of 16% in the April - July period this year on the back of a better-than-expected growth in agri output. The 30% increase in MSPs of major crops, significantly increased investments by the government in the rural sector and agriculture, through a variety of schemes in irrigation, rural employment, education and infrastructure, as well as an improved availability of credit and lower interest rates. India has the world's largest tractor market, with a total sales volume of 3,04,000 units in 2008-09, compared with 1,60,000 tractors in 2003. Relatively young as compared to other countries, it has expanded at a spectacular pace in the last four decades. In the last six years, the tractor market has grown 89% and the industry is expected to see a growth of anything between 5% and 8% in 2009-10.