Tractor domestic sales outlook FY 2020- FY 2024

786 840
711 j 709 ;

Fy18 FY19 FY20 FY21E FY24P
P: Projected
Source: CRISIL Research

862

Thousand Vehicles

The following impediments will crimp growth, relative to past 6-7 years:

¢ — States such as Haryana, Punjab and Gujarat have already reached high horsepower (hp) penetration; growth
here will be restricted unless tractors penetrate small and marginal farmholds

¢ Going forward, high growth in minimum support prices is unlikely to continue in view of the central
government's fiscal constraints and fixing of inflation control emerging as the central pillar of economic
policy. Moreover, the cost of agricultural inputs such as seeds, fertilisers, and farm labour is rising, affecting
farmers' profitability

Over next four years (fiscals 2020 to 2024), the following structural factors will support 4-6% growth:

« The government's objective of doubling farm income by 2022 via initiatives such as e-NAM (National
Agriculture Market), expansion of crop insurance coverage, direct income support and improvement in land
productivity via soil health cards. These measures should improve farmers’ crop yields and affordability, and
boost tractor penetration

e The government's renewed thrust on enhancing irrigation intensity and making the nation more drought-proof
is expected to support agriculture growth and increase mechanisation. Irrigation investments to increase by a
CAGR of 4-6% in a long run.

¢  Custom-hiring centres are being promoted through government incentives. The trend is catching up in
Karnataka, Madhya Pradesh, Andhra Pradesh, Telangana, and Orissa and encouraging farmers to lease
tractors. States such as Karnataka, Madhya Pradesh, Andhra Pradesh and Punjab are promoting such hiring
centres through training, demonstrations and financial incentives

e Tractor rental services made available on mobile applications by manufacturers -- such as Jfarm by TAFE
and Trringo by Mahindra -- to prop up demand for tractors in long term. Global companies such as Hello
Tractors in association with Aeris, a California-based technology company, is also planning to launch a pay-
as-you-use tractor service for Indian farmers

Tractor exports to continue to decline in fiscal 2021 after drop in fiscal 2020; Recover on a low base in fiscal
2022

Exports are expected to contract by 10-12% in FY21 as 28% of tractor exports are to top 20 COVID impacted
countries where demand is expected to be impacted. After a fall in exports in fiscal 2020 and 2021, CRISIL
Research expect the exports to rebound and grow at 14-16% in fiscal 2022.

Off-highway vehicles

Construction equipment demand to shrink due to ripple effect of Covid-19 and consequent economic
slowdown in fiscal 2021

The construction equipment (CE) sector is expected to take a mighty blow from the nationwide extended
lockdown to curb the spread of the Covid-19 pandemic, which has pushed back a much-anticipated economic
recovery this fiscal by bringing movement of people and goods and all major industries to a standstill.

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