Tractor sales to rise 4-7% in FY26; two-wheeler industry also set for growth: ICRA

New Delhi — India’s tractor market is projected to grow by 4-7 per cent in FY2026, while the two-wheeler sector is also expected to record healthy growth, according to a report released by rating agency ICRA on Tuesday.

The positive outlook is driven by above-average rainfall, strong rural incomes, festive demand, and recent GST rate reductions, which are expected to improve affordability and stimulate sales.

The tractor segment has already shown robust performance this fiscal year. Wholesale volumes in August 2025 rose 28.2 per cent year-on-year (YoY), while cumulative growth for the first five months of FY26 stood at 11.7 per cent. Retail sales in August jumped 30.1 per cent compared to the same month last year, reflecting strong farmer sentiment and favourable monsoon conditions.

India has received 108 per cent of the long-period average rainfall until September 17, boosting agricultural activity and rural demand. The recent cut in GST rates on tractors to 5 per cent is expected to further strengthen festive-season sales. Additionally, the industry anticipates pre-buying ahead of the TREM V emission norms coming into effect from April 1, 2026.

Tractor manufacturers are expected to maintain healthy financial profiles, supported by steady demand, operating leverage, and stable raw material costs.

In the two-wheeler industry, wholesale volumes rose 7.2 per cent YoY in August to 1.8 million units, as manufacturers accelerated dispatches ahead of the festive season. Retail sales, however, grew modestly by 2.2 per cent due to heavy rainfall in some regions and customers postponing purchases to benefit from GST reductions. Stronger demand recovery is anticipated during the festival period.

Exports supported the sector, with shipments rising 27.5 per cent in August compared to the previous year. Electric two-wheeler sales also continued steady growth, with 1,04,725 units sold in August — a 1.8 per cent increase month-on-month. EV penetration in the two-wheeler segment remained stable at 6-7 per cent.

Looking ahead, ICRA expects domestic two-wheeler volumes to grow 6-9 per cent in FY2026, driven by replacement demand, recovery in urban markets, strong rural incomes from a good monsoon, and GST cuts making vehicles more affordable.

With inputs from IANS