China's agricultural machinery Matthew effect is stronger
As the world falls into the Uka era characterized by instability, uncertainty, complexity, and ambiguity, China's agricultural machinery industry, which enjoys the title of "eternal sunrise industry," is facing a new round of adjustment and reconstruction - emission upgrading, grain price adjustment, significant market decline, and prominent Matthew effect---What is the Matthew effect?
The English name is Matthew Effect, which is a concept proposed by sociologist Robert K. Merton in the mid-20th century. In Chapter 77 of Laozi's Tao Te Ching, there is a similar statement: "The way of heaven is to make up for the excess when it is damaged, while the way of man is not to make up for the excess when it is damaged.".
After experiencing a golden decade of rapid growth, China's agricultural machinery industry has entered its own reshuffle stage in recent years - with opportunities in segmented markets and industry giants devouring the dividends. The worse the market, the better the brand manufacturer, and the more obvious the Matthew effect.
Key stage: Policy continues to exert force, and the market is expected to recover
The annual Central Rural Work Conference was held in Beijing from December 19th to 20th. The central government attaches great importance to this conference. Before the meeting, the Standing Committee of the Political Bureau of the Central Committee held this meeting and put forward clear requirements for doing a good job in agriculture, rural areas, and farmers.
He stressed that priority should be given to the development of agriculture and rural areas, and work should be carried out creatively in combination with reality to speed up the modernization of agriculture and rural areas and better promote the construction of Chinese path to modernization.
The meeting emphasized the need to ensure that the grain production in 2024 remains above 1.3 trillion catties; Strengthen the protection and construction of arable land, improve the "three in one" protection system of arable land quantity, quality, and ecology, prioritize the construction of high standard arable land in black soil areas, plain areas, and areas with water conservancy and irrigation conditions in Northeast China, and appropriately increase the level of investment subsidies.
At the National Conference of Directors of the Department of Agriculture and Rural Affairs held on December 20th, Minister of Agriculture and Rural Affairs Tang Renjian stated that the work layout for 2024 should revolve around the main line of comprehensively promoting rural revitalization and accelerating the construction of an agricultural strong country, focusing on promoting agricultural production with food security as the focus and rural revitalization with rural development, construction and governance as the focus. He called for a steady and steady promotion of agricultural production, with two pronged efforts to stabilize the area and increase yield per unit, ensuring that grain production remains stable at over 1.3 trillion kilograms, continuously improving soybean oil production capacity and self-sufficiency rate, stabilizing livestock, poultry and fishery production, and ensuring effective supply at a higher level.
The construction of high standard farmland has a significant driving effect on the recovery of the agricultural machinery market and the demand for intelligence, accelerating the upgrading trend of the agricultural machinery industry. According to data from the Ministry of Agriculture and Rural Affairs, the mechanization level in high standard farmland project areas is 15-20 percentage points higher than that in general non project areas.
In addition, in the past three years, most grain prices have remained relatively stable with an increase. In addition, with the support of policies such as national grain subsidies, farmers have increased their confidence in farming, which is also a major factor driving the recovery of the agricultural machinery market. In 2022, the comprehensive mechanization rate of cultivation and harvest in China reached 73%, which has great development prospects compared to the 90% agricultural mechanization rate in many developed countries.
Clear direction: one "big" and one "small", intelligent opportunities
In 2023, the Chinese agricultural machinery market has seen a significant decline, and even data from the National Bureau of Statistics has turned downwards. In 2023, the operating income of 2199 enterprises above designated size in the Chinese agricultural machinery industry is expected to be 240 billion yuan, a year-on-year decrease of 10.38%; Profit decreased by 14.36% year-on-year. Ranked last in the Chinese machinery industry.
Industry experts point out that the future opportunities lie in the upgrading of the agricultural machinery industry brought about by changes in agricultural production factors, especially in sub market opportunities such as mechanization of economic crops and agricultural machinery. Specifically
Firstly, the scattered and blocky characteristics of cultivated land in China have affected the development of agricultural mechanization and scale, resulting in high production costs. With the advancement of urbanization, aging rural population, and land transfer in recent years, the scale management of domestic land continues to advance, driving the upgrading of the agricultural machinery industry.
The third is the industry reshuffle brought about by the upgrading of the "National IV", and some enterprises without technological advantages will be unable to meet the product quality guarantee under the upgrading of the "National IV". In addition, as the user group shifts towards organized groups such as grain growers and agricultural machinery cooperatives, the demand for branded agricultural machinery from agricultural machinery users will significantly increase. Advantage enterprises will gain more market share due to brand effects.
The "Matthew effect" is obvious: the "strong ones" such as Lovol, YTO, Yangma, and Keith are stronger
Since December, business conferences for production enterprises have been held one after another. The key tasks for agricultural machinery enterprises in the near future are to determine the 2023 transcript, adjust the strategic tactics (products, finance, services, etc.) for 2024, and analyze the tactics of competitors. The characteristics of the Matthew effect can be seen from their publicly available data.
On December 19th, Weichai Lewo Smart Agricultural Technology Co., Ltd. (referred to as "Weichai Lewo") released its 2023 report: the total sales of agricultural machinery for the year are expected to exceed 120000 units, and the sales revenue is expected to exceed 14.5 billion yuan. According to a dealer friend, Weichai Lewo's sales target for 2024 is 20 billion yuan, an increase of 37% compared to 2023.
Yangma Agricultural Machinery (China) Company has not disclosed specific performance. But according to a person in charge of a Japanese owned enterprise familiar with the company, Yangma Agricultural Machinery China Company achieved a considerable success in 2023- with sales revenue of about 1.5 billion yuan and net profit of about 200 million yuan, creating the best performance in history.
It is worth mentioning that from January 1, 2024, Ma Heng, Deputy General Manager of Yangma Agricultural Machinery (China) Company, will be promoted to the 8th General Manager of the company. At this point, except for Chairman Keisuke Ueda, all middle and senior management, especially in marketing management, of the company will be Chinese. The pace of localization is further accelerating, and it is expected to be closer to users and more products will be launched in the Chinese market. This reflects the enormous attractiveness of the Chinese market.
Luca Manati, President of Kaisnew Netherlands Industrial Group China, also stated that the development potential of the Chinese agricultural machinery market is highly regarded by the industry. And Kaisnew Netherlands is fully prepared for this. Manati stated that the group will have a deeper understanding and meet the specific needs of the Chinese market, continuously innovate and iterate technology, in order to achieve greater breakthroughs and growth in the Chinese market. For Kaisnew Netherlands, this is not only a market strategy, but also a journey of advancing together with Chinese agriculture.
Xue Wenpu, Deputy General Manager of YTO Corporation, also stated that YTO China and its distributors have jointly experienced the severe market test brought about by the first year of the transition of the agricultural machinery industry to the fourth phase. In the face of a significant decline in demand in the agricultural machinery market in 2023, China First Tractor has maintained a good development trend, with stable and rising market competitiveness. Dongfanghong Big and Medium Tractor continues to maintain its position as the industry leader, and new breakthroughs have been made in overseas key markets. Product exports have reached a new level, and the pace of new product launch continues to accelerate.
