Domestic Tractor Demand Set to Rebound Amid a Mixed Automotive Outlook

Axis Securities report predicts a rebound in domestic tractor demand for FY25 due to favorable monsoon conditions and robust Rabi harvest. While the commercial vehicle sector faces challenges, two-wheelers show growth, especially in exports. Moderate growth expected across OEMs despite varied performance in different vehicle segments.

According to a report by Axis Securities, the domestic tractor market in the automotive sector is anticipated to experience a significant rebound in the remaining months of the fiscal year 2025. This resurgence is attributed to above-normal monsoon conditions, increased reservoir levels, and a fruitful Rabi harvest, all of which are expected to enhance tractor demand significantly.

The domestic commercial vehicle (CV) industry recorded a flat year-on-year sales trend with a 20% month-on-month decline, largely due to decreased medium and heavy commercial vehicle (MHCV) truck volumes. However, the loss was partially offset by robust bus sales. In the three-wheeler segment, domestic wholesales for Bajaj and TVS fell by 5% and 28% year-on-year respectively, while M&M enjoyed a 22% growth. The report noted steady volume growth in the tractor industry, with discrepancies in the commercial vehicle sector, where buses excelled as trucks trailed.

The report expressed cautious optimism about the commercial vehicle market while maintaining a preference for two-wheeler original equipment manufacturers (2W OEMs) in the medium term over private vehicles (PV) and tractors. Two-wheeler dispatches increased by 3% year-on-year, buoyed by a 32% rise in exports. Robust rural demand and new model launches supported growth in this segment. Meanwhile, domestic vehicle volumes for Bajaj, HMSI, and Suzuki increased, while Hero and Bajaj experienced slight declines. Despite challenges, the domestic passenger vehicle sales showed some resilience with notable contributions from SUV volumes.

(With inputs from agencies.)