Agco, CNH, Deere face threat from Asian rivals
Western-based tractor giant such as Agco, CNH Global and Deere & Co face a battle to preserve market share in their own backyard as developing country rivals look abroad to escape slowdowns in their domestic markets.
Farm equipment makers from emerging market countries have already gained a foothold in Western nations, and now manufacture nearly one-in-six low horsepower tractors sold in Western Europe.
That compares with one-in-20 at the start of the decade, and reflects sales growth of 20% a year.
And that trend, led by Asia Pacific manufacturers, of "moving aggressively" into the West, looks set to continue, advisory group AlixPartners said.
"Original-equipment manufacturers are seeing their share in some established markets, for example Western Europe, under attack," the US-based group said.
Peter Busse, director in AlixPartners’ heavy equipment practice, said: "New second-tier players are aggressively entering established markets and at a fast speed, with a focus on the low-horsepower end of the market."
These manufacturers are "gaining market share with equipment that costs materially less, and through well-developed commercial approaches", he added.
Indeed, they are "fundamentally changing the competitive landscape for agricultural equipment" in developed countries.
The trend reflects in part the prospect of relatively fast growth in many Western markets, notably North America which, with growth of 4.4% a year between 2011-15, to prove the world’s fastest-growing region in terms of tractor sales volumes.
Sales will be encouraged by "rising farm incomes", AlixPartners said.
Meanwhile, sale in India, the world’s biggest tractor market, where volumes are expected to break through 500,000 this year, will "slow dramatically", as it faces up to the dynamics of small farms.
"Due to an agriculture industry that is transitioning from manual to automated labour and small land holding size, India’s tractor industry is characterized by small tractor size, which may bring weaker margins and future pricing pressure," the group said.
Meanwhile, the Chinese market will "stagnate" as the impact of reduced farm support feeds through, although there will be trade-ups to larger equipment.
"The overall market will continue to grow even with flat unit sales as equipment mix evolves to include larger, highly-engineered products," the group said.
And the South American market will decline, at least until 2014, largely reflecting moves by Brazilian authorities to weaken the real – and so boost export prospects, but at the expense of affordability of foreign goods such a farm equipment – and to cut agriculture perks such as a low interest loans programme.
AlixPartners recommended Western farm equipment giants to boost their prospects by expanding in emerging markets, feeding an increasing appetite for more sophisticated equipment, while cutting manufacturing costs by stealing a strategy followed by car-makers of building different products around the same parts.
"Adopting automotive industry-like ‘platform’ approaches to standardisation and cost-control" offers manufacturers "big opportunities", the consultancy said.
Statistics: Posted by yoda — Wed Jun 06, 2012 10:25 am
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