Mahindra & Mahindra recently announced up to 13 days of no-production for its farm equipment factories following a 15% drop in tractor sales over the last 3 months. Tractor manufacturer Escorts also making plans to reduce inventory over the summer.
The late monsoon season has created a powerful drought in many parts of India, impacting all aspects of agriculture and hurting sales of farm equipment.
“The monsoon situation is a worry, though in the last few days it has been picking up speed. The reservoir levels are very low and drought is acute. In Maharashra the market is down by 30-50% and in Tamil Nadu, it is down by 20-30% already,” said Shenu Agarwal, chief executive of Agri Machinery & Emerging Business at Escorts Ltd.
Analysis for the year remains un-optimistic, with the current downtrend in the market expected to lead into an overall unprofitable year.
“June should see an 8-10% drop in sales, and overall the year should be flat-negative,” said Agarwal.
This news comes after John Deere also announced a production cutback in their Q2 earnings report. Along with a 6% drop in net income and a 6% increase in net sales & revenue from John Deere, production cutbacks amid market downturn are becoming increasingly commonplace.