Tractor companies are having one of their best runs ploughing through this pandemic while their counterparts, the cars and trucks were having a tough time, finding especially rough roads in cities.
In Sept’20, the tractor industry recorded a historic and second highest ever monthly sales by volume. As per data published by Tractor and Mechanisation Association, total tractor production stood at 99,523 units during the month. This was on the back of increase in demand and also due to inventory build-up by companies ahead of the festival season.
Total domestic sales in September stood at 108,585 units, up 28% (YoY). This is second highest after its all-time high sales of 1,12,556 units sold in Oct’18.
Tractor companies are ramping up production and most of them are working at over 80% capacity currently. Those tracking the sector say that Oct could see another historic high sales.
Escorts, for its monthly sales number for Sept said that it saw a 9% (YoY) rise in tractor sales, selling 11,851 tractors. It sold more than last year though we have the pandemic this year – that’s the underlying fact that we need to focus on.
Mahindra & Mahindra’s tractor unit, Mahindra Tractor, reported 17% (YoY) increase in total tractor sales at 43,386 units in September.
VST Tillers & Tractors, in Sept’20, reported a huge 50.07% jump in sales to 1,004 units in over 669 units in Sept’19.
TAFE, part of the Amalgamations Group from Chennai recorded a 38% (YoY) jump in tractor sales for Sept at 19,973 and it saw its market share increase by 1.2% and is the number two, with market leader being M&M.
Sonalika Tractors, a Punjab based company doing very well in the region, reported a 46% jump in Sept sales at 17,704 tractors. Point to be noted here – it sold more than Escorts!
What is causing this boom in rural India while urban suffers? In rural India, agriculture ruled the rooster. The farmers did have a good rabi and they had the money in their hands when covid struck. The return of their relatives back home also meant more hands to work on the field and more mechanisation. What also helped was the good monsoon.
As indicated by the agriculture ministry, farmers went in for early sowing and kharif sowing was at 109.53 million hectares v/s the 107.07 million hectares, which is the usual average. We are looking at a record output of kharif food grains at 144.5 million tonnes this year.
Undeniably, the various measures taken by the Govt to help mitigate the pandemic impact on rural India also helped – the increase in MSP, more money under MGNRES also helped push up the demand for tractors.
Well, if you are a compulsive “auto” stock buyer, you now know which stocks to buy in this sector.