Escorts Limited have a capex of Rs 400 crore for the current fiscal (2022-23) for introducing new products and for creating production capacity.
The company recently started exporting its electric tractors to the US and Europe and it anticipates that this will contribute to around 15% of its overseas shipments within 5-6 years of duration.
“Capex right now, our initial estimate will be about Rs 350 to Rs 400 crore (for FY23) mainly in both capex on the manufacturing side as well as on the product side,” said Escorts Ltd Group CFO Bharat Madan.
He said, “So, we need capacity for that. But right now, we are in the process of doing this mid-term business plan, which is likely to be ready by September-October. After that, we’ll have more clarity (on the) industrial roadmap going forward and how the investments will happen in the next two years.”
“As the domestic volume goes up and exports go up, we need to expand the vendors’ capacities also. We need some investment in the tooling, etc, which is also part of the capex programme,” he added.
Madan said, “We have been exporting electric tractors now. It has very good demand. We are exporting now. That is one of the focus areas for Kubota (the new promoters of Escorts) also and they are keen to invest into that segment”.
He added, “Our overall exports today are only 7,000 to 8,000 tractors. We may be looking at 30,000 to 40,000 tractor exports in the next five to six years. We’re targeting that electric should be a large segment in that and at least we’ll have 10 to 15 per cent number coming from electric tractors”.
Some tractors have been exported to Kubota for testing and the demand received from the US is good and the orders are in the execution stage. The only constraint is batteries coming from China.
“We are trying to localise those lithium-ion batteries. The localisation will lead to cost savings and the constraint will get addressed. That is a process which is ongoing right now and may take a few months. When that is done then the India capacity should be sorted out. Then we can look at larger volumes in terms of export,” he added.
The cost of electric tractors is too high for the domestic market. So, I don’t think farmers are ready. The infrastructure is not there, and second, the cost is still prohibitive said, Madan.
Once the product is fully manufactured locally, it will decrease the costs and the electric tractors can be launched in the country. Madan concluded, “We have the approval for the domestic laws, but we are back due to the issues (cost and infrastructure).”