India’s domestic tractor sales are projected to scale a new peak of around 9.75 lakh units this fiscal, rising 3–5 per cent year-on-year and surpassing the previous record of 9.45 lakh units in FY23.
This growth momentum comes as the sector enters a fresh capital expenditure (capex) cycle worth about ₹4,000 crore, spurred by the rollout of new emission norms and strong financial footing of leading manufacturers, according to a CRISIL Ratings analysis.
Domestic tractor sales grew by a healthy 8 per cent at about 9.40 lakh units in FY25, according to data from the Tractor & Mechanization Association (TMA).
Growth in FY26 is expected to be fuelled by an above-normal monsoon, higher minimum support prices (MSPs) for key crops, improving rural sentiment and increased replacement and construction demand. Pre-buying ahead of the TREM V emission norms, set to take effect from April 1, 2026, could further lift volumes. The new norms are expected to raise tractor prices by 10–20 per cent, depending on engine size.
“The Indian Meteorological Department’s forecast of above-normal monsoon should lift rural sentiment and reinforce farmer confidence, which is crucial for driving farm investments such as tractors,” said Anuj Sethi, Senior Director, CRISIL Ratings. “The expected rise in MSPs and continued infrastructure push, especially in roads, will further support sales.”
CRISIL’s analysis of five leading OEMs — representing over 90 per cent of industry volumes — shows the sector’s strong financial health. Stable margins of 13–13.5 per cent amid easing input costs, low debt and healthy liquidity are enabling strategic investments in emission control and capacity expansions.
“Tractor manufacturers have entered fiscal 2026 on a strong footing,” said Poonam Upadhyay, Director, CRISIL Ratings. “With capacity utilisation nearing 75-80 per cent and TREM V norms prompting the need for cleaner technologies, the sector is poised for a strategic capex cycle of around ₹4,000 crore. Yet, capex-to-EBITDA will remain lean at below 0.25 times, reflecting strong financial discipline.”
The rollout of TREM V norms across all horsepower (HP) segments is expected to increase tractor prices 10-20 per cent, depending on engine capacity, and could trigger pre-buying. A similar trend played out post the TREM IV2 rollout, when above-50 HP tractor sales dropped, and farmers pivoted to 41-50 HP models — the dominant segment with 64 per cent share — highlighting their sensitivity to price hikes, pointed out the rating agency.
Agriculture accounts for 70-75 per cent of tractor demand, with construction and related activities making up the balance.
However, analysts caution that certain macroeconomic variables such as the spatial and temporal distribution of rainfall, movement in commodity prices, interest rate trends and the rollout of emission norms will remain key monitorables in the medium term.
Published on April 21, 2025
