Escorts tractor sales decline by 30%; Here are the major reasons

As the market expected a drop in automobile monthly sales, Escorts posted a 67% drop in domestic tractor sales.

Escorts Agri Machinery (EAM) in November 2021 sold 7,116 tractors as against 10,165 tractors sold in November 2020, a drop of 30% year-on-year. This segment contributes 82% of total revenue.

Breakup of the segment: Domestic tractor sales in November 2021 was at 6,492 tractors against 9,662 tractors in November 2020, registering a decline of 67%. Export tractor sales in November 2021 was at 624 tractors against 503 tractors sold in November 2020, registering a growth of 24.1%.

Major reasons for the decline:

1. Delayed harvest of Kharif crops owing to late monsoon rains this year affected the rural cash flows and hence the retail demand. This is believed as a temporary phenomenon and cash flows should start improving soon as Kharif harvest gets fully monetized.

2. Industry wholesale in November was further impacted by post-season channel destocking. Going forward all macroeconomic factors remain in favour of the tractor industry.

3. High inflation remains a worry impacting profitability. 

Next product segment is Escorts Construction Equipment (ECE) which contributes 12% to total revenue. Escorts Construction Equipment Segment (ECE) in November 2021 sold 312 machines against 417 machines sold in November 2020, a drop of 25.2% year-on-year.

Major reason for the decline:

1. Steep increase in commodity prices and rental rates remains a concern for the retail customers and this seems to be a major reason for the postponement of order finalization.

2. South India markets remain under stress due to the extended monsoons and the delay in the mobilization of projects.

However, the company continued to remain positive on construction equipment demand given the big tail of projects to be executed under the National Infrastructure Pipeline (NIP) and the latest projects awarded by the central government.

While writing this article, Escorts was trading at Rs 1,849, up by 0.16% for the day