Slow slalom sales

S. Muralidhar

THE SALES of the tractor industry grew by an average compounded annual growth rate (CAGR) of over 8 per cent between 1970 and 1990 -- much higher than the GDP growth rate and agricultural production then.

However, since 1998, the industry's growth rate has been on a downhill, even if slowly.

The trend is expected to continue this fiscal, though the industry is likely to see a marginal recovery in volumes in the remaining months. However, the recovery in volumes is likely to be region- and segment-specific.

Another trend the industry is likely to witness is the increasing preference for new technologies among tractor buyers. Technologies that make tractors more user-friendly and versatile -- synchromesh gears, more power take-off (PTO) applications, oil-immersed disc brakes and rust proofing -- could lead to a shift in favour of multinational tractor companies, particularly as many of them have either launched or are planning to launch `volumes-driven' lower HP tractors.

With the increased use of farm implements, the demand for upper mid-segment tractors such as those in the 30-40 HP range and the 40-50 HP range, is expected to improve. Here again, the MNCs are expected to have the edge. However, domestic companies have been catching up, offering a number of features and applications in their products.

The year 2001-02 is expected to close with a total industry sales of about 2.2 lakh units compared to 2.6 lakh units and 2.87 lakh units in 2000-01 and 1999-2000 respectively.

Tamil Nadu, Karnataka and Andhra Pradesh could record an improvement in sales in the remaining months of the year, that is, if the second spell of rains is good. However, the improvement is unlikely to make any substantial impact on total sales, as it constitutes 13 per cent of all the tractors sold in the country.

Contrary to the general trend, and reflecting the revival of demand in the States that have recovered partly from last year's drought, Gujarat, Madhya Pradesh and Rajasthan have seen an increase in tractor sales in the first half of the current fiscal. This trend is expected to continue, and sales in these States may close 8-23 per cent higher.

Sales in Punjab and Haryana are expected to stagnate. Bihar, Maharashtra and Uttar Pradesh, which were growing markets, are likely to witness a substantial fall this year.

The slowdown in demand in the domestic market has led to a renewed focus on exports. Further, with realisations from exports improving, domestic tractor-manufacturers are exploring opportunities overseas, even the advanced markets of the US and Europe. The favoured countries for tractor exports include the US, Poland, Mexico, Turkey, Brazil and Argentina. After seeing the Indian market shrink in the last two years, even MNC and joint venture tractor companies are actively considering exporting out of their operations in the country.

Domestic tractor majors such as Punjab Tractors Ltd (PTL), Escorts and Mahindra & Mahindra (M&M) are pushing for exports by developing new products specifically suited to these new markets. PTL is developing an 80 HP tractor for the US market and has begun selling one of its existing models, the 60 HP tractor, with upgraded features in that market. It is also developing a four-wheel drive tractor, a garden tractor and a front-end loader for the US market. To facilitate the distribution of its products, PTL has appointed a dealer in the US and plans to appoint four more there.

Escorts already has two overseas ventures to market its tractors. These include Long Manufacturing Inc, US, a company in which Escorts has 49 per cent stake, and another joint venture in Poland. Mr Rakesh Chopra, Business Head, Agri-Machinery Group, Escorts, said the company is investing heavily in developing new products to cater to the specific needs of overseas markets. It is now working on a four-wheel drive tractor to be launched late next year in Europe. M&M is also actively involved in exports to neighbouring countries and the US.