India's tractor market is predicted to grow at an impressive rate of around 10 percent over the next 5 years owing to a rise in demand for mechanization in the agriculture and logistics industry. While India’s tractor market stood at around 709 thousand units in the financial year ending March 2020, the strengthening of the financial state of the agriculture industry by waving off loans, other government subsidies, and the increasing popularity of bank financing are some of the major factors fuelling the growth of tractor market in the country.
The Indian tractor market is segmented based on application type, power output, drive type, and region. While this market is divided into agriculture, construction, mining, and logistics based on application type, the agriculture application segment is anticipated to continue witnessing robust growth among the others in coming years. Owing to its all-purpose use such as plowing, tilling, planting, etc., the agriculture industry contributes to the majority of the country’s tractor market.
While tractors are distinguished amidst rated engines of below 40HP and 41HP to 100HP segments in terms of engine power output, with the cost being a major driver of this sector, tractors with rated power output under 40HP currently dominate the market.
The majority of the mechanized farming is from the Northern and western parts of India, and the Northern part of the country dominates the Indian tractor market, followed by the West region.
Capacity Utilization by Farm Equipment Segment
The manufacturing of tractors was severely disrupted owing to the sporadic lockdowns in automobile hubs such as Aurangabad, Pune, and Bangalore in July 2020 and this is one of the few sectors that have seen a surge in demand post the coronavirus pandemic, senior industry executives said.
The farm equipment segment observed major capacity utilization recover rapidly to about 90-95 percent in the month of June after the nationwide lockdown was lifted. This was due to the demand generated by the above-normal monsoon and higher crop acreage. However, much of the gains were lost in the month of July as sporadic lockdowns in the hubs to contain the virus threw the production into disorder.
“The localized lockdowns enforced in certain cities hampered the ramp-up of the supply chain and, thus, affecting production at OEMs (Original Equipment Manufacturers) in 2020,” said Hemant Sikka, president, farm equipment sector at Mahindra and Mahindra Ltd, which has a 42 percent share of the domestic tractor market.
With the sector getting back to normalcy, the market is witnessing a revival in sale of tractors and it is growing unabated driven by the measures towards mechanization of agriculture.