M&M Anticipates 5% Degrowth in Tractor Industry for FY24 Amid Weak Rural Sentiment

Despite the industry downturn, Mahindra remains resilient and continues expanding its market share in the tractor segment.

In a recent revelation, Mahindra & Mahindra (M&M), a prominent player in the automotive industry, anticipates a significant 5% decline in the tractor industry for the fiscal year 2024. This revelation comes as a result of subdued rural sentiment, according to the top leadership at M&M. The downturn, attributed to subdued rural sentiment, has significantly impacted sales across tractor, small commercial vehicle, and entry-level utility vehicle segments.

Factors Contributing to the Downturn

According to Rajesh Jejurikar, Executive Director and CEO at M&M, the softness in rural demand is primarily due to multiple factors including uneven rainfall distribution and record low water reservoir levels over the past five years. Such conditions have further increased the challenges faced by tractor manufacturers, adding to the already subdued rural market sentiment.

Rural Demand: A Post-COVID Challenge

Post-COVID-19, rural demand has exhibited unpredictable behaviour, with irregular upswings during festival seasons in recent months. The tractor market, once robust, is now in a recession, indicating a significant deviation from its prior growth path.

Insights from M&M's Leadership

Dr Anish Shah, MD and CEO of M&M shed light on the trajectory of the tractor industry, noting a significant decline from the previous growth rate of approximately 27% to a current 4% decline on a year-on-year basis. Despite this decline, the anticipated sales of around 900,000 units for FY24 still reflect a substantial market size.

M&M's Market Positioning

Despite the industry downturn, Mahindra remains resilient and continues expanding its market share in the tractor segment. Notably, the company's market share surged by 80 basis points to 41.8% in Q3 FY24, marking the highest third-quarter performance since FY19. Strategic marketing initiatives, including investments during the cricket World Cup and the launch of new small horsepower tractors Oja and Target, have significantly contributed to this growth.

Also Read: Mahindra Launches Comfortable Subcompact & Compact Tractors

Mixed Performance Across Automotive Segments

While M&M's SUV segment continues to exhibit strong double-digit growth, the sales of light commercial vehicles and the Bolero UV have been adversely impacted by the rural slowdown, as highlighted by Jejurikar.

Despite prevailing challenges, Jejurikar expressed optimism, citing potential revival factors such as favourable monsoon conditions and increased government spending in rural areas post-elections. Additionally, he emphasized positive terms of trade for farmers, with output inflation at 6% and input inflation at 3%, indicating increased income potential and the potential to bolster rural sentiment.

Mahindra & Mahindra navigated through a challenging landscape in FY24, dealing with weakened rural sentiments and an unusual downturn in the tractor industry. However, with strategic measures in place and optimism for potential revival factors, the company remains poised to weather the storm and emerge resilient in the face of adversity.