Market Trends of Agricultural Tractors Industry
This section covers the major market trends shaping the Agricultural Tractors Market according to our research experts:
Increasing Farm Mechanization in Developing Markets
- Precision farming and the increasing adoption of farm technology to boost production are driving up demand for tractors. Agricultural equipment can use technology like high-precision positioning systems (such as GPS and GNSS, automated steering systems, geo-mapping, sensors, and remote sensing) and integrated electronic communication to produce superior results from machine operations. For instance, Deere & Company provides Precision AG technology for farm machinery like tractors and other items. The company provides display systems, receivers for seeding and planting, harvesting, and field preparation and tillage equipment. The launch of such items has a substantial impact on the growth of the agricultural tractor market.
- The increasing number of farm training programs promoting the use of agricultural machinery on a wide scale is also driving the tractor industry. With an engine volume of not more than 1,500 CC, these tractors occupy less space and can be used with greater flexibility. Ease of customization makes them more amenable to experimentation, and consequentially, manufacturers are willing to try new components and technologies in this segment before moving on to high-powered ones. Low-horsepower tractors work well in soft soil conditions, such as river basins. The lesser than 40 HP tractors are mainly used for horticulture. In developing countries, the demand for lower HP tractors is high due to the low disposable income of farmers and high labor costs. Farmers prefer small and customized tractors for agricultural purposes due to small farmland sizes. Moreover, lesser fuel consumption by small tractors helps empower small and marginal farmers. Governments in developing countries like India promote farm mechanization by subsidizing equipment purchases and supporting bulk buying through front-end agencies.
- Furthermore, due to the increasing demand from developing countries, the major players in the market are innovating new products. For instance, in February 2021, TAFE launched a new DYNATRACK Series, which is an advanced range of tractors that offer dynamic performance, sophisticated technology, unmatched utility, and versatility, engineered into a single powerful tractor. These factors are likely to drive the market during the forecast period.
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Asia-Pacific Dominating the Market
- In the Asia-Pacific, China, Japan, and India lead in terms of the number of tractors sold. Around 60% of China's farm activities are mechanized. According to data from the National Bureau of Statistics of China, large and medium-sized tractors are gradually being replaced by small tractors. At the end of 2020, there were 4.4 million large- and medium-sized tractors in the country. The government included agricultural machinery in its 'Made in China 2025' campaign. The program is expected to help the country produce most of its farm equipment domestically, which is expected to increase the sales of tractors in China.
- Most people in India are agriculture-dependent. According to the Indian Brand Equity Foundation, 58% of the total population in India are farmers. Thus, there is a great market for tractors in India. The agriculture sector in India has witnessed a substantial decline in the use of animal and human power in the agriculture sector. Fossil fuel-operated vehicles, such as tractors and diesel engines, are being used instead, which has resulted in a shift from the traditional agriculture process to a more mechanized process.
- In order to increase the mechanization level, the Indian government is promoting 'Balanced Farm Mechanization' by providing subsidies on various equipment and supporting bulk buying through front-end agencies, which is expected to strengthen the tractors market in India. For instance, the government of India offers various schemes for agricultural equipment, such as loan-cum-subsidy for the purchase of tractors. In addition, as per NABARD norms, any farmer with eight acres of land can take a tractor loan for a period of nine years with a 12.5% rate of interest. Thus, the implementation of programs by governments in the region, along with the increasing tractor usage across, is expected to drive the market during the forecast period.
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