October calling for Tractor companies
Neerja Agarwal / 24 Oct 2017
The inventory buildup in the months of July and August was the highest ever in the last 9 years. October being seasonally strong month, we expect the inventory levels to lower aided by normal monsoon.
Tractor manufacturing companies like Mahindra and Escorts saw a spike in sales of their agricultural equipment segment in September, though from an industry standpoint the tractor sales have been sluggish in July and August.
India received for the 2nd consecutive year normal monsoon which has boosted the demand for tractors on the expectations of a better sowing pattern.
However, we see that month of July and August had anomaly to the pattern seen over the last nine years. The production in July and August kept increasing at a rapid pace while the sales for industry keep dipping steeply. The inventory buildup of ~24,000 units was the highest ever in the last 9 years.
We can also see a deferment in the buying decision by farmers as the rains extended till the mid of October. Also, the GST rate revision on tractor and its components from 28% earlier to 18% has provided the much-needed boost to tractor manufacturers to cater the demands of the price-sensitive Indian tractor market.
We also see that seasonally October has been a strong month for the tractor industry. With high inventory and production still on full steam, we expect the sales of the major tractor companies to see a boost in October on month on month basis. Also, its note worthy that tractor sales of ~100261 units in Oct 2016 was the highest ever seen in the tractor industry over last 9 months. So on year on year basis we expect the industry sales to be moderate at ~15% growth.
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