Slowdown in tractor industry persists

Sales fall 40% to around 15,200 units in first half

LAHORE: The slowdown in the tractor industry has continued as tractor sales dropped further to just over 15,200 units in the first half of current fiscal year 2019-20, a decline of 40% compared to the same period of previous fiscal year.

According to figures released by the Pakistan Automotive Manufacturers Association (Pama), tractor sales fell to 50,405 units in FY19 from 70,887 units in FY18 and the situation worsened in the first six months of ongoing fiscal year.

"The downturn in the tractor industry is becoming alarming as we enter the new decade," said Al-Ghazi Tractors CEO Mohammad Shahid Hussain.

He added that sales of tractors by his company stood at only 5,881 units in the first six months (Jul-Dec) of current fiscal year.

His company had managed to sell 17,993 units in FY19, which was much lower than the 27,839 units sold in FY18. At the current pace, tractor sales of the company by the end of current year would be below 12,000 units.

Hussain said numerous factors contributed to the decline in sales including the current economic slowdown, fall in crop yields and prices, inflation and a high cost of borrowing.

"The backbone of the tractor industry is the more than 200 vendors who have over 10,000 skilled and unskilled workers," the CEO pointed out

"In the present situation, most of them are on the verge of collapse owing to either no or extremely low orders."

He added that the industry was in no position to raise hopes of the vendors about short-term improvements due to uncertainties. He urged the government to take immediate notice of the situation and provide some breathing space to the industry for partial revival.

"At a time when the industry's profit had shrunk visibly coupled with the low affordability of farmers (end-users), the government, in July 2019, introduced additional sales tax and enhanced customs duty on the import of CKD components by the automakers including tractor assemblers," he lamented.

He termed it a massive blow which was difficult to absorb or pass on to the end-consumers who were already suffering.

The CEO asked the government to consider tractor sales as part of the agriculture sector and requested that they should not be treated or clubbed together with any other segment apart from agriculture.

Back in 2015, he added, the government raised sales tax on tractors to 15%, which led to a massive decline in the sales volume and revenue collection.

"Authorities have to revert back to the previous regime that existed in 2017 and curb sales tax to 5%, which had revived the industry and the year was one of its best," he said.

Published in The Express Tribune, January 10^th, 2020.

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