Tractor sales growth to be in low mid-single digits in FY22 on higher FY21 base: India Ratings

Tractor sales volumes are expected to grow in low, mid-single digits of 3 to 6 per cent year-on-year in FY22, mainly on a higher base following 27 per cent growth witnessed in FY21, India Ratings and Research (Ind-Ra) said on Thursday.

Macroeconomic tailwinds mostly remain intact for the rural economy, including normal monsoon forecast, expectation of a strong kharif harvest and improved rural income, it said.

Though the second Covid-19 wave impacted sales in April and May with average monthly sales dropping to 76 per cent of monthly sales achieved in 4Q FY21, the industry witnessed a sharp rebound in June.

Ind-Ra said sales volume is likely to pick up from 2Q FY22 as localised lockdown restrictions have been relaxed.

However, given that 1Q is generally a critical quarter with seasonally higher sales (around 33 per cent), especially in May and June for land preparation for kharif season, sales lost are unlikely to be recovered in subsequent part of the year.

Ind-Ra also said that tractor purchase may be deferred in favour of saving for or incurring higher medical expenses amid the anticipation of a third Covid-19 wave.

In case the country witnesses a third wave which is as severe as the second one resulting in localised or nationalised lockdowns, the growth could be flattish.

Ind-Ra expects the tractor industry to record 7 to 10 per cent revenue growth in FY22, driven by volume growth and increased realisation per tractor. But margins are likely to be affected due to rising input prices.