New Delhi: India’s largest tractor manufacturer Mahindra & Mahindra will focus on exports after the festive period. The company had placed exports temporarily on the backburner to cater to the unprecedented domestic demand.
Rajesh Jejurikar, executive director – auto and farm sector, M&M, during the second-quarter earnings call on Tuesday, said, “We had de-prioritised exports for the time being. We had too much of a backlog to cover in the domestic market. As soon as the festivals are over, we will start looking at the export markets.”
The automaker has been witnessing an unprecedented demand in the domestic market driven by timely relaxation of the COVID lockdown restrictions for the Agricultural sector supported by healthy reservoir levels, a good increase in MSP for Kharif crops and important reforms in the agri-sector
While company’s domestic tractor sales jumped by 31% to 89,597 units in the second quarter ended September 30, as compared to 68,359 units sold a year ago, the overall exports (vehicle + tractors) fell by 33%. The company exported 7,103 units in the July-September period as against 10,540 units in the corresponding quarter in the previous fiscal.
The Q2 FY21 results reflect the turnaround of the FES (Farm Equipment Sector ) global businesses. Magna in the US is showing very good momentum. We are seeing positivity in the North America business, Mexico, Brazil and so on.Rajesh Jejurikar, executive director – auto and farm sector, M&M
Low exports have been a pain-point of M&M for quite some time. According to analysts, the recent cap on incentives by the government under the Merchandise Exports from India Scheme (MEIS) from September 1 is likely to weigh down the export outlook further.
Meanwhile, in October, Mahindra’s farm equipment sector witnessed an uptick of 23% in exports to 970 units as compared to 787 units in October 2019.
The company is optimistic about a good rebound in many of its export markets in a few months. “The Q2 FY21 results reflect the turnaround of the FES (Farm Equipment Sector ) global businesses. Magna in the US is showing very good momentum. We are seeing positivity in the South Asia business. We are also seeing a positive demand in North America, Mexico, Brazil and so on,” Jejurikar said.
The Texas-based Magna, a wholly-owned subsidiary of M&M, gained 50 basis points in Q2 market share and 41% increase in retail volumes. Handicapped by the shortage of raw materials, the Magna unit was running out of models, he said.
M & M witnessed significant improvement in Brazil, where retail volumes were up by 35%. In Mexico, it gained 380 basis points in market share during January-September for the less than 100 hp segment.
“We hope to directionally keep this momentum going where we will be close to breakeven as we move on,” Jejurikar said.
About the demand and supply situation in the tractor business, Pawan Goenka, MD and CEO, M&M, said, “On the tractor side, the situation was better. Supply was normal as there was no BS-VI transition kind of situation. We also faced the problem of very little inventory when the lockdown opened. Normally we stock up tractors for the festive season. This time there was no possibility of stocking up.”
The company has been recording the highest-ever production with each passing month keeping in line with the strong demand. According to the industry veteran, this demand is structural as pent-up demand can’t last for so long.
“However, the real test for auto companies will come in January. Till mid-November Diwali demand will be very high. The rest of November-December will be used for building up inventory, and then we will see what happens in January,” Goenka said.