India's Agriculture witnessing impressive advancements in tractor technology

Janifha Evangeline

Earthworms were earlier known to be a farmer’s best friend owing to the multitude of services they offer. However, with technological advancements, earthworms have been supported by tractors as they play a major and vital role in agriculture. India is observing advancement in the agricultural sector owing to the onset of new revolutionary farming machinery such as hi-tech tractors, along with which the Government of India, through its various schemes, such as Pradhan Mantri Krishi Sinchayee Yojana (PMKSY), is rendering subsidiaries for the purchase of agricultural machinery, such as tractors, wagons, and other farming machinery in the country. Therefore, India’s farmlands are witnessing impressive advancements in tractor technology along with innovations by major companies of the country.

“If I were to go back in time 100 years and ask a farmer what he’d like if he could have anything, he’d probably say he wanted a horse that was twice as strong and ate half as many oats. He would not say he wanted a tractor. The point is, technology changes things so fast that many people aren’t sure what the best solutions to their problems might be,” said Philip Quigley, the retired Executive Director of Pacific Telesis Corporation and has been on the board of directors of Wells Fargo & Company and several other Fortune 500 companies.

Helping farmers track their tractors
This is what technology can do to people and offer them the best solution that they never even dreamed of. One such innovative data-driven app that helps farmers track their tractors and control their farming activities was developed by the largest manufacturers of tractors in the country. This Next-Gen AI-driven open architecture connected solution of the largest market leaders in the Indian tractor market was designed and developed with an aim to empower farmers with data on their farming operations. And, this in turn will enable them to make more profitable decisions. Therefore, the inventors of this app say that this solution is compatible with 4G and various types of devices from smartphones to standard laptops and nothing can escape the farmer’s eye, now.

Another advanced range of tractors that offer dynamic performance, sophisticated technology, unmatched utility, and versatility, all engineered into a single powerful tractor was launched by the second largest tractor manufacturer in India in February 2021, which is also the third-largest tractor manufacturer in the world.

How the tractor sales surpassed sales of commercial vehicles
Tractor sales surpassed commercial vehicles both in terms of volume as well as value for the first time in the last fiscal year in India. Despite the pandemic, agriculture and its allied sectors grew, bolstering demand for tractors and other farm equipment. However, the pandemic and the restrictions on movements weakened and decreased the demand for not only transporting goods but also pulled down the sales of commercial vehicles.

While truck perceived as a barometer of economic activity, tumbled down to a decade low in the fiscal year - 2021 at 5.75 lakh units, the tractor sales meanwhile registered 26 percent to a record high at 8.99 lakh units.
According to an ETIG analysis, tractor sales have generated around Rs 48500 crore on March 31, 2021, in terms of revenue, and revenue from commercial vehicles that are priced higher is estimated at Rs 47500 crore. When the tractor sales were ahead of trucks by 1400 units in fiscal as well, the truck sales had generated double the revenue.

In the Fiscal Year 2020, the gap between tractor and commercial and vehicle sales was about 8000 units, with the tractor sales at 7.09 lakh units and commercial vehicles at 7.17 lakh units and in terms of revenue, the difference was Rs 21000 crore, with Commercial Vehicles generating Rs 60000 crore.

Hemant Sikka, President of the Farm Equipment Sector at Mahindra & Mahindra and president of the Tractor Manufacturers Association, said the Agri sector was the most resilient in FY21 in the face of adversities.

“Classified as an essential activity, the Agri industry was allowed to operate and serve the farmers, even while the rest of the country was still under lockdown,” Sikka said. This drove “unprecedented growth” in the segment, with the supply chain, manufacturing, and sales network recovering very fast, he added.

The record volume was also sustained by two consecutive years of above-normal monsoon rains, which happened for the first time since 1960. Furthermore, while major crops saw higher yields, the realization on-farm produce was high at 12 percent and this resulted in higher disposable income and improved cash flows which led to a bumper year for tractor industry growth.

If not for a shortage of parts, the volumes could have been even higher in the tractor sector. However, on the contrary, the industrial sectors had to endure a strict lockdown. Commercial vehicle manufacturers also faced numerous challenges owing to a shortage of parts and the workforce when the market reopened.

What catapulted the operating margins of the listed tractor players to a record high was the higher sweating of installed capacity and lower expenses during the pandemic. The market leader in the Indian tractor segment posted an operating margin of 24.4 percent in the December quarter.

The tractor industry was the only segment of the automotive business which expanded on a compounded annual basis in the last five years. The tractor volume grew 12.7 percent annually in the last five years.

Future trends
The Indian agricultural tractors market is anticipated to register a CAGR of 4.5 percent until 2026. The tractor sales in India dropped only in April 2020 owing to lockdown restrictions. However, the demand for agricultural machinery which also includes tractors surged. This was mainly owing to higher Kharif sowing, good cash flows to farmers, a timely and monsoon in India, in the months of June and July, continued higher rural spending by the government, and exemption from lockdown restrictions. Therefore, no major impact is seen on the Indian agriculture market owing to the global pandemic.

Other factors, such as enhancing rural wages and scarcity of farm labor are expected to increase the tractor volume over the long term along with various Government initiatives about rural development and farm mechanization. As one of the world’s largest tractor markets, in terms of units, India sells 6 lakhs to 7 lakh tractors on average and remains a highly lucrative market in this landscape due to the decreasing availability of farm labor and the surge in innovative business models which includes custom hiring solutions for tractors.

While the Indian Agriculture machinery market is consolidated and dominated by large global and domestic manufacturers, farmers prefer trusted brands for Assurance of quality and after-sales services offered by the big companies. The Global leaders and leading players occupying the highest share in the Indian agricultural tractors market are going for joint ventures intending to not only achieve higher sales but also increase their production capacity. One such instance is where Escorts Limited, entered into a joint venture with Japan's Kubota Corporation, in Dec 2018, intending to create a manufacturing capacity of producing 50000 tractors in India.