Tractor sales will be affected by second wave of COVID-19 in rural areas: Escorts
With the second wave of the COVID-19 pandemic hitting rural areas, tractor sales will be affected in the short term, although in the second half of the fiscal year they are likely to pick up to give the industry a boost. single-digit growth, according to a senior agricultural equipment official at Major Escorts Ltd.
The company, which has a joint venture with Japan’s Kubota, expects exports to grow by around 55% in 2021-2022, with Europe being a key driver as it plans to enter the markets of Southeast Asia and Brazil via its partner. .
“Unlike the first phase (of COVID-19) where the impact was not there at all on the rural market, this time everything is very extensive. It affects not only the urban area, (but) the partners of distribution and dealerships are also closed due to the lockdown in the states. It is clear that this will have an impact, it is more serious and it is going to impact everyone, “said Bharat Madan, group chief financial officer. Escorts Ltd, at PTI.
He was responding to a question about the impact of the second wave of the pandemic on tractor sales.
“I think in the short term it will have an impact. The first quarter will certainly bear the brunt of it but in the second half we should see demand come back like the last time we had good pent-up demand after the lockdown.” , he added.
While the planting season has yet to start and this time it looks like âthe planting season isn’t really that kind of good numbers,â Madan said, âBut I think next season and H2 will make up for it. . ”
Asked about the possibility of repeating the strong growth of the last fiscal year, he replied with a negative saying “it doesn’t seem likely at all because the base itself has risen so high now because the industry has hit a new high l ‘last year”.
However, Madan said that “all rural factors are still positive on the agriculture side” and that “this will give some kind of mid-digit growth compared to last year.”
According to the Federation of Automobile Dealers Associations (FADA), tractor registrations in 2020-2021 increased by 16.11% to 6.44,779 units against 5.55,315 units in 2019-20.
âOverall, it still looks positive as nothing has changed on the ground in the rural part. The feelings are all good at the moment. It’s about when we can sort this out, then people will be relieved and get vaccinated, âMadan said, adding, however,â we have to keep our fingers crossed that there is no third wave. , which is more severe than what we have seen â.
On the export front, he said: âToday we export over 500 tractors every month. So this year we are looking at a good number, 6,000-7,000 units versus 4,000-4,500 the last year. ”
Stating that Escorts Ltd continues to focus on exports, Madan said: “This is an area that we will continue to improve year by year. This time the maximum exports occur to the European market, where small Segment tractors below 30 hp are doing extremely well. It is the biggest selling model for export today, and it has really contributed to the good growth. ”
In other global markets, he said the company is also processing the 60-70 hp segment.
Escorts Ltd is also relying on its joint venture partner Kubota for its global expansion.
âNow that Kubota has also opened up their network, we have started exporting to them to the European market. They plan to bring it to the Southeast Asian market, Thailand, Vietnam, Myanmar. These markets will open, âhe added, adding that the company will move to the Americas and to countries like Brazil.
When asked if the second wave of the pandemic had an impact on his planned investment of Rs 100 crore to expand his production capacity to 1.8 lakh units per year from 1.2 lakh units, he said answered in the negative.
âThere’s no holdback. Anyway, since we expect pent-up demand to happen and we’ll see good numbers. It has to happen, or we’ll be under capacity again. So let’s go ahead with the expansion plan and by August-September we should have this increased capacity (available). â
Madan, however, said the company is not looking for new investment because it will have enough capacity to meet future market demand.
“This is the third year in a row that we have seen a good monsoon. We expect, perhaps, that corrections will be made next year,” he said, adding that the existing capacity should be sufficient for at least the next few years. the company’s aspiration to improve its market share.
Nonetheless, he said, for future expansion of its capacity, the company will have to decide whether to invest new investments in its existing factories or consider a new venture with its joint partner Kubota. Escorts currently has production units in Faridabad.
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