Tyre wholesale growth forecast at 1–4% in FY27, ICRA says, as tractor sales face risks

ICRA said domestic tractor wholesale volumes are likely to rise only 1-4 per cent in FY27. The ratings agency linked the slower outlook to a high base. ICRA also flagged weather risks. It said deficient precipitation could hurt farm output and then reduce tractor demand.

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The outlook followed a strong FY26, when wholesale volumes rose 23.5 per cent, ICRA said. However, ICRA expects growth to cool in FY27. The agency also said tractor makers should keep healthy margins. It cited operating leverage and steady raw material costs as support.

Tractor wholesale volumes outlook and monsoon risks

ICRA referred to the IMDs first-stage Long Range Forecast LRF for the 2026 southwest monsoon. It indicated below-normal rainfall at 90 per cent +/- 4 per cent of the Long Period Average LPA. ICRA said El Niño conditions may develop during the monsoon. The agency warned this could weaken farm output.

ICRA said weak rainfall can affect agricultural production and then tractor sales. At the same time, ICRA noted that farm cash flows have support. It pointed to strong crop output in AY2025-26, MSP support, and government subsidies. Still, ICRA said El Niño risk could weigh on FY27 demand.

Tractor wholesale volumes data, May trends and emission norms

ICRA said tractor demand stayed firm in May. Wholesale volumes climbed 19.3 per cent year-on-year. Retail volumes increased 13.6 per cent YoY in the same month. ICRA attributed the rise to a low base, steady farm cash flows, and improved affordability after the GST rate cut.

ICRA said growth may slow due to emission norms timing changes. The government deferred and staggered the revised standards, ICRA said. It added that this led to pre-buying in FY26. The shift moved the key 30-50 horse power segment deadline to April 2028 from April 2026.

Tractor wholesale volumes and farm output estimates

ICRA cited official output numbers for context on farm incomes. It referred to the second advance estimates from the Ministry of Agriculture and Farmers Welfare in March 2026. The data showed kharif and rabi foodgrain output for AY2025-26 rose 3 per cent year-on-year. ICRA linked this gain to healthy rainfall in CY2025.

ICRA said tractor manufacturers should keep comfortable credit profiles. It cited healthy profitability, low leverage, and adequate liquidity. The agency also said margins are likely to remain healthy. It again pointed to operating leverage and stable raw material costs. ICRA added that FY27 volume growth may stay modest at 1-4 per cent.

With inputs from PTI