M&M projects 5% growth in domestic tractor industry in FY25

Mahindra & Mahindra, a major player in the agriculture equipment segment, expects the domestic tractor industry to grow by around 5% year-on-year (YoY) in FY25, on the back of a forecast of an above-normal monsoon, strong macro factors including a recovery in farm output, and government focus on rural spending, to name a few. 

The company attributed the aforementioned factors to IMD's 'above-average' monsoon forecast at 106% of LPA (Long period Average). 

Secondly, farm output is expected to see recovery, while agriculture exports are likely to witness robust growth. Furthermore, the government focuses on infrastructure development, increasing agriculture, and rural spending. Agriculture credit availability is meant to provide a boost to the overall rural economy, translating into tractor and agribusiness sales. Additionally, another positive benefit is likely to come from a shift in the Navratra festival in Q1FY25 and Q4FY25

The projections from M&M come even as the domestic tractor industry in FY24 went down by 7.4% to 8.76 lakh, from a record high of 9.45 lakh in the previous year. This decline was attributed to factors such as festive ships, erratic, uneven, and deficient rainfall, as well as a lower water level in the reservoir, leading to delayed crop harvest and sowing and lower output.

While the positives are many, the company leadership is keeping a watch on two factors. The first is the continuing El Nino conditions until May, leading to concerns about muted Rabi output and associated income and the second is the national election, which is currently ongoing in the peak season months of Q1 FY25.