Mahindra & Mahindra bets on monsoon to push tractor sales

The top management at Mahindra & Mahindra (M&M) believes the tractor industry will grow at a much faster of 12-14% y-o-y in 2018-19 than the earlier anticipated 8-10%. The optimism stems primarily from the fact that the monsoon could be a good one and comes on the back of two good monsoons in 2017 and 2016. The higher farm incomes are expected to drive up the demand for tractors which are already selling well. The total number of tractors sold in India in 2017-18 was 7,11,478, an increase of 22% over 2016-17.

Speaking to a business news channel on Friday, Pawan Goenka, managing director, M&M, observed , “We are in the third year of a very good growth. Although the pattern is cyclical, we have had three years of good monsoons which does not happen very often. Therefore, it is looking good so far.”

M&M, which is the market leader in the tractor industry with an over 40% market share, sold 3,04,019 units in 2017-18, up 22% over the previous year.

At the end of June 2018, M&M commanded a market share of 43.3% ahead of other major industry palyers, including TAFE, Sonalika and Escorts which occupy 18.8%, 11.3% and 10.7% market share, respectively.

In the three months of April-June, the tractor volumes stood at 97,360 units, up 19% y-o-y. The farm equipment segment accounted for 37% of M&M’s total revenues in Q1FY19, up from 28% in Q4FY18. Moreover, the Ebit margin stood at its all-time high at 21%. “Margins expand as the volumes grow but it will be difficult to do better than this. We have tried internal cost reduction measures and bring efficiency in the business and we would keep trying,” Goenka added.

Mahindra India