In Agri Crisis, Farmers and Tractor Dealers are Stuck In.

The industry experiences increased pressure on agricultural machinery sales and the need of the hour is to implement targeted strategies to manage dealer profitability, mitigate downside risks and address farmer concerns.

Inaccurate product specifications such as the actual horsepower of the tractor has put farmers at a high risk of machine damage due to misuse and then this adds to their repair and maintenance expenses. Poor servicing support from dealers also impairs efficiency levels, particularly during peak seasons.
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Dealer Inventories Brings Down by Tractor Companies.

After a year of good run followed by two quarters of declining volumes, tractor makers are finding inventories rise over 30 days — a first in four years — as against the normal time of three weeks. Tractor volumes for the current fiscal have declined 6.6% as compared with a year ago period on back of delayed monsoon.

“Tractor companies are trying to bring down dealer inventories which has shot above 30 days now. We anticipate that by the next monsoon there could be an additional 10% drop in tractor sales,” said TR Kesavan, President, Tractor Manufacturers Association.

Tractor dealers, who have seen robust sales in FY14, have not yet resorted to raising discounts to spur sales. Instead they are focusing on managing inventories. On back of a good monsoon, volumes in FY14 had grown 20% to 634,151 tractors.

“Primarily, a late monsoon this year led to the decline in tractor sales. Further, elections and then the sugar factory prices put pressure on farmers. For the rest of the year we expect demand to slide but not beyond 10%. Inventories are on the rise but we are doing our best to manage them,” said Jitendra Pandit, a Mahindra tractor dealer in Maharashtra.

In terms of markets, UP, which traditionally has been the largest contributor and accounts for about 17% of the total tractor sales, saw a marginal increase in sales for FY15 so far. Other bigger markets following UP such as Madhya Pradesh, Rajasthan and Maharashtra saw a drop of 10-20% in volumes during the period as the region was affected by rains. Haryana and Punjab too declined by about 3% during the period under comparison.