Indiastockguru Team
The Indian auto retail sector witnessed double-digit volume YoY growth of 13.8% in July 2024. All auto segments saw positive YoY volume growth except tractors. Two wheelers led the show in the month of July followed by three wheelers and passenger vehicles.
While the two wheeler segment was supported by positive monsoon effect and better stock availability, the passenger vehicle segment was driven by new model launches and attractive pricing strategies.
Auto retail volume growth would have been even better had not been pulled back by the tractor segment. The Indian agricultural sector accounts for about 70-75% of tractor demand in India. Tractor demand is dependent on monsoon intensity and distribution, farmer income, rural sentiment and government rural support schemes.
After peaking in January 2024 with strong double-digit YoY volume growth, tractor retail volume growth has been muted and disappointing since March 2024. Tractor demand is influenced by farmer income which varies according to unpredictable weather conditions. In June 2024, severe heatwave and insufficient rainfall impacted tractor demand which fell 28% YoY. In July, the monsoon revived but the distribution pattern was erratic. Speaking on monsoon activity in July 2024, FADA Vice President Mr. C S Vigneshwar said,“ The geographical distribution was uneven, with Southern and Central India receiving excess rain, while 10 meteorological divisions experienced a double-digit deficit.”
Tractor demand is either postponed or deferred in case of insufficient rainfall or excess rainfall in the form of flash floods. The Indian Meteorological Department (IMD) has forecasted above normal monsoons in the August-September period due to formation of La Nina conditions. While strong monsoon activity is good for kharif crop sowing and tractor demand, flooding and landslides will impact retail growth in hilly regions. Hopefully the start of the festive season with Ganesh Charuthi in September will be an auspicious beginning for the tractor growth and rural economy as a whole.
