Monsoon boost to drive tractor volumes to new high of ~9.75 lakh units
New Delhi: Domestic sales volume of tractors is set to hit an all-time high of ~9.75 lakh units in fiscal 2026, increasing 3-5% on-year, supported by an expected above-normal monsoon, higher minimum support prices (MSPs) for key cash crops and better replacement and construction demand.
With the new TREM V emission norms1 expected from April 1, 2026, pre-buying towards fiscal end may also provide a fillip to volume.
As a result, tractor sales this fiscal are expected to surpass the peak of 9.45 lakh units achieved in fiscal 2023, sustaining the back-to-back volume growth seen during fiscal 2019 (see chart 1 in annexure). There was a healthy ~7% increase in sales in fiscal 2025.
Rising volumes and easing input costs should keep the operating margin of manufacturers stable at 13.0-13.5% this fiscal, in line with the past two fiscals. With strong cash flow, low debt and robust liquidity, tractor makers are well-positioned to invest in capacity and upgrade emission control technologies.
A Crisil Ratings analysis of five tractor original equipment manufacturers (OEMs), accounting for over 90% of industry volumes, indicates as much. Agriculture contributes to 70-75% of tractor volumes and construction and related activities contribute the balance.
Says Anuj Sethi, Senior Director, Crisil Ratings, “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. This, along with the expected rise in MSP for key cash crops, and pick-up in construction activity, especially roads, supported by sizeable government allocation in the Union Budget for this fiscal, should help drive 3-5% volume growth for tractors this fiscal. Besides, the anticipated TREM V-driven price hikes from April 2026 could trigger pre-buying in the last quarter of fiscal 2026, providing a boost to volume.”
The rollout of TREM V norms across all horsepower (HP) segments is expected to increase tractor prices 10-20%, 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% share — highlighting their sensitivity to price hikes.
Says Poonam Upadhyay, Director, Crisil Ratings, “Tractor manufacturers have entered fiscal 2026 on a strong footing with margins stable at 13-13.5% on softer input costs and sustained volume growth. With capacity utilisation nearing optimal levels of 75-80% and the push for cleaner technologies under TREM V, a strategic capex cycle is around the corner, worth ~Rs 4,000 crore. Yet the capex-to-Ebitda will stay lean below 0.25 times, underscoring the sector’s financial resilience.”
That said, the spatial and temporal distribution of monsoon and its impact on agriculture and rural incomes, movement in commodity prices and interest rates, and implementation of emission norms will remain monitorables over the medium term.
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