The Tractor Industry is reeling under a slow demand for last 3 months and the sales have declined by 15% forcing tractor manufacturers to cut production. The Tractor Industry leader Mahindra & Mahindra has declared between 5 to 13, No-Production days in the 1st quarter of FY1920. Similarly, Escort has also cut its production output.
The outlook of monsoon is also not very encouraging this year and the industry expects a contraction in tractor demand. The severe draught like conditions in major markets has already seen a dip in tractors demand by 30 to 50% in Maharashtra and 20 to 30% in Tamilnadu. Although the monsoon has been picking up speed in past few days but the reservoir levels are very low and drought is acute.
The above two markets comprise of 10% of tractor industry size and has impacted the overall industry volumes. The companies have somehow been able to survive and counter the sales drop, due to high growth markets like Madhya Pradesh.
The current level of tractor industry inventory is 35 days. Escort has which has successfully achieved a dealer inventory of 21 to 25 days due to last few years efforts has also been facing issues as the extra tractors kept for April Navratra festival did not go as planned due to subdued demand. This led to increase in dealership inventory forcing company to go for production cut.