Coherent Market Insights

Agricultural Tractor Market to surpass US$ 122.66 Bn by 2031

Agricultural Tractor Market to surpass US$ 122.66 Bn by 2031 - Coherent Market Insights

Publish In: Apr 30, 2024

The agricultural tractor market is estimated to be valued at USD 83.56 Bn in 2024, growing at a CAGR of 5.6% over the forecast period (2024-2031). Farmer preferences are shifting towards more efficient and productive tractor models. Furthermore, the adoption of driverless tractors and other autonomous technologies in agriculture are expected to gain traction during the forecast period.

Market Dynamics:

The growing demand for food owing to the increasing population globally has led to higher pressure on limited arable land and farm production. This has propelled the need for agricultural mechanization and efficient farming equipment such as tractors. Tractors help plowing, tilling, and other cultivation activities more effectively compared to traditional manpower. Furthermore, rising farm labor costs have encouraged farmers to invest in tractors and other mechanized solutions to optimize productivity. The market is also witnessing increasing demand for tractors with advanced features such as GPS, telemetry, and variable horsepower which are driving productivity and maximizing the farm output.

Market Drivers: Increasing Agricultural Production is Driving the Demand for Tractors

The global demand for food is continuously increasing due to rising population. This is forcing farmers to ramp up agricultural production in order to meet the growing food demand. Mechanization of farming activities through tractors is helping farmers increase crop yield and productivity. Tractors offer advantages like higher power and torque capabilities, which allows farmers to till large tracts of land and carry out other farming activities faster. They are also preferred for heavy duty tasks like plowing, harrowing, planting, and material handling. The need to boost agricultural output through higher productivity is a major factor propelling the sales of tractors across countries.

Market Drivers: Government Subsidies on Agricultural Machinery Encourages Tractor Purchase

Many governments offer attractive subsidies and tax benefits on agricultural equipment like tractors in order to support local farmers. This makes tractors affordable for farmers and encourages higher adoption. For instance, the government of India offers a subsidy of up to 60% on tractor and farm equipment purchases under various subsidy schemes. Such subsidy programs have boosted tractor sales in the country over the past decade. Rising mechanization through the subsidized purchase of modern agricultural machinery helps increase the farm output and income of smallholder farmers. The availability of financial incentives significantly impacts farmers' decision to invest in new tractors.

Market Restraints: Declining Arable Land is Restraining the Market Growth

There has been a consistent decline in cultivable land area across major agricultural regions due to factors like urbanization and land degradation. This shrinking farmland poses a challenge for increasing agricultural production levels. It reduces the need as well as affordability of purchasing new high horsepower tractors which are suitable for large landholdings. Farmers with smaller land parcels instead prefer low-cost compact tractors or traditional mechanized equipment. The declining availability of arable land acts as a restraint on the sales of conventional high horsepower tractors.

Market Restraints: High Initial Investment Requirement Hampers the Adoption of Tractors

Tractors have a high initial capital cost which poses affordability issues for smallholder and marginal farmers who form a major customer base. An average tractor is priced between $25,000 and $50,000 depending on the model and horsepower. This substantial upfront investment requirement restricts widespread adoption, especially in developing economies where access to agricultural financing is limited. Farmers instead rely on rented tractors or outdated mechanized equipment which impacts the recurrent purchase volumes for Original Equipment Manufacturers (OEMs). The high cost of new tractors remains a key challenge curbing their demand growth potential in key price-sensitive markets.

Market Opportunities: Growing Emphasis on Mechanization in Emerging Markets

Many developing Asian, African, and Central/South American countries are continuously transforming their agricultural practices and infrastructure to boost productivity and farm output. Their governments are promoting mechanization through favorable policy initiatives, finance schemes and infrastructure development projects. This builds a conducive ecosystem supporting wider adoption of modern agricultural equipment. Leading tractor manufacturers are eyeing these emerging highly populated markets with rapidly growing farm mechanization levels as lucrative long-term growth opportunities. Proactive government support for mechanization drives high potential demand in developing markets.

Market Opportunities: Increasing Contract Farming is Opening New Market Avenues

The contract farming model where corporate undertake crop cultivation on large leased farmlands is gaining prominence globally. This arrangement involves mechanized multi-crop commercial farming utilizing fleets of high-powered tractors. Many agribusiness firms are entering into long-term agreements with landowners to cultivate high-value crops for the supply to food processing and retail sectors. This shifts the ownership and funding of modern equipment to the contracting corporate, opening new indirect sales channels. Leading tractor OEMs are tapping into this evolving business practice of organized commercial farming through strategic partnerships. The growth of contract farming presents lucrative opportunities for tractor and farm mechanization manufacturers.

In conclusion, while factors like rising food demand, government support, and evolving farming practices in emerging countries are fueling tractor sales, declining cultivable land and high initial costs pose challenges. Tapping growth opportunities in developing markets through customized solutions and innovative business models can help manufacturers sustain long-term growth in the agricultural tractor market.

*Link: https://www.coherentmarketinsights.com/market-insight/agricultural-tractor-market-5341

Key Developments:

  • In March 2021, CLAAS KGaAmbH is a leading global manufacturer of agricultural machinery and equipment launched the CLASS ARION 400 tractors equipped with turbochargers and 4-valve technology, offering lower AdBlue and diesel consumption. This release aimed to bolster CLAAS's market position.
  • In September 2022, Kubota Corporation is a global leader in the manufacturing and distribution of agricultural machinery announced the launch of an electric compact tractor in Europe by 2023, aiming for carbon neutrality. Named LXe-261, the model will be available for long-term rental service by April 2023.
  • In July 2022, Mahindra & Mahindra Ltd. is a renowned multinational corporation based in India, specializing in automotive, farm equipment, and financial services. introduced the Yuvo Tech+ range featuring ELS 4-cylinder engines and mZIP3 cylinders for improved mileage, torque, and power. With three speed options (H-M-L), this range optimizes performance for various agriculture and soil types, strengthening Mahindra & Mahindra's market position.
  • In May 2022, Tractors and Farm Equipment Limited is a prominent Indian company specializing in the manufacturing and distribution of tractors, agricultural machinery, and diesel engines. launched the EICHER PRIMA G3 Series, incorporating high-intensity 3D cooling technology and the Digi NXT Dashboard for extended and uninterrupted operations, enhancing its market standing

Key Players:

Agco Tractors (Fendt), Captain Tractors, Eicher Tractors, Escorts Tractors, Force Tractors, Gromax Agri Equipment Limited, John Deere Tractors, JCB, Kubota Tractor, Mahindra Tractors, Monarch Tractor Electric Tractor, New Holland Tractors, SDF, Sonalika Tractors, SOLECTRAC, Standard Tractors, and Swaraj Tractors

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