Mahindra and Mahindra Ltd (M&M), market leader in the Indian tractor industry, is betting on farm equipment because of increasing demand. The decision is greatly influenced by the healthy agricultural output, record sales for tractors and reverse migration since last year.
PSR Analysis: The company is trying to enter the untapped farm mechanization segment in the country. According to Mr. Hemant Sikka (President Farm Equipment Sector Mahindra) this market has very high potential as India has only 1% share of the global farm equipment market vs. 10% of the global tractor market.
This segment of off-road vehicles has been an exceptional performer in 2021. Sales have beat expectations and have hit historic highs. The supply side situation is normalizing. Demand is strong due to a better monsoon forecast, outstanding Kharif procurement season, bumper Rabi sowing season, which is 3% more than last year.
The agricultural segment wasn’t impacted significantly by the pandemic in the first wave; however, the second wave is spreading wider and deeper into the rural areas and might dampen the segment’s growth.
Despite the COVID related conditions, the market continues to be strong on the back of positive macro-economic factors and strong rural cash flows. As a result, the segment experienced healthy growth of 6.3% during 2020 and will further grow by 13.7% in 2021, a trend that will continue in 2023. PSR
Aditya Kondejkar is the Research Analyst – South Asia Operations, for Power Systems Research
