The agricultural machinery industry is about to usher in a new round of prosperity

Promoting a new round of large-scale equipment updates and exchanging old for new consumer goods is a major decision made by the Central Committee of the Communist Party of China with a focus on the overall high-quality development of our country. In accordance with the requirements of the Central Committee of the Communist Party of China's deployment, we must adhere to market orientation and government guidance, encourage advanced and eliminate backward, adhere to standard guidance and orderly improvement, accelerate the improvement of plans, carefully organize and implement, promote the continuous increase in the proportion of advanced production capacity, and allow more high-quality and durable consumer goods to enter the lives of residents, so that this work can benefit more enterprises and consumers.

We need to combine the differentiated needs of various equipment and consumer goods updates, increase policy support in finance, taxation, and finance, better leverage the traction role of energy consumption, emissions, technology and other standards, orderly promote the upgrading and renovation of key industry equipment, construction and municipal infrastructure equipment, transportation equipment, old agricultural machinery, education and medical equipment, and actively carry out the trade in of old for new consumer goods such as automobiles and home appliances, Form a scale effect of updates and replacements. We need to implement a comprehensive conservation strategy, accelerate the establishment and improvement of a recycling and utilization system, promote the remanufacturing of waste equipment, and improve the level of resource recycling.
The above news, once released, has aroused great attention from industries such as automobiles, home appliances, construction machinery, and agricultural machinery. Recently, many people in the agricultural machinery industry have also sought the author's views on this policy. Since everyone is very concerned, the author believes it is necessary to have a deep interpretation of this policy and predict its impact on the agricultural machinery industry based on this.
1、 Interpretation of New Policies
The large-scale equipment updates and trade in policies this time are very similar to the policies promoted by the government after the 2008 financial crisis, such as promoting household appliances and cars to rural areas, to stimulate domestic demand. In the previous round of policies, many rural areas and townships digested a large amount of backlog of products and production capacity through government subsidies and trade in, promoting the operation and improvement of related industries in a short period of time. This is actually a policy to stimulate domestic demand, a Keynesian economic stimulus measure; In addition to the trade in of consumer goods, there will also be a large-scale equipment update this time. The policy's starting point is to stimulate consumer willingness, enhance investment confidence, and promote industrial upgrading.
Optimistically, it is estimated that after the policy is implemented, its action and influence will be very strong, and relevant industries and enterprises will benefit from it. The agricultural machinery industry, which is in a recession, may also usher in a new round of prosperity.
1. Large scale and economies of scale
Everyone should pay special attention to the words and phrases "large-scale" and "forming a scale effect of updates and replacements". It is expected that this policy will be very strong on one hand, and on the other hand, its popularity will be wide. At the same time, policy makers have high expectations for this policy, which lays the foundation for the implementation of policies and related investment in the later stage.
2. Encourage advancement and eliminate backwardness
Last December's Central Economic Work Conference emphasized the need to "focus on expanding domestic demand", which mentioned the need to use improving technology, energy consumption, emission standards, and other factors as a driving force to promote large-scale equipment upgrades and the exchange of old for new consumer goods. Some experts believe that improving technology, reducing energy consumption, reducing emissions, or upgrading equipment in this round are important directions, and the new opportunities in the agricultural machinery industry are mainly in the application of new technologies, green and intelligent aspects.
3. Increase policy support in finance, taxation, and finance
There were no statements or content related to subsidies, fiscal transfer payments, etc. in both meetings, which indicates that this round of large-scale equipment updates is likely to be mainly through indirect means such as finance, taxation, and financial policies, supplemented by direct cash subsidies. However, the agricultural machinery industry has a subsidy policy for purchasing agricultural machinery in the early stages, and the combination of scrapping and updating, old for new, and subsidy policies in the later stage is highly likely to organically combine, and the industry is expected to receive more cash subsidies, The effect of cash subsidies on the consumer side will be more significant.
4. High quality durable consumer goods
Consumer goods include industrial consumer goods and civilian consumer goods, as well as general consumer goods and durable consumer goods. Agricultural machinery is both a general consumer product and a durable consumer product. Li Qiang presided over a State Council executive meeting and clarified that the policy of exchanging old for new includes old agricultural machinery, which means that agricultural machinery can enjoy the dividends of this round of policies. I believe that upon seeing this, a stone in the heart of agricultural machinery practitioners will fall to the ground.
2、 The impact of a new round of large-scale equipment updates on the agricultural machinery industry
When analyzing this policy, we must make it clear that large-scale equipment updates and trade in refer to completely different things. Large scale equipment updates refer to the production equipment and upgrading of industrial enterprises, while trade in refers to consumer goods, among which agricultural machinery is a durable consumer product. By clarifying this point, we can accurately and structurally analyze this policy and predict its impact on agricultural machinery enterprises themselves and the market.
1. Boosting the industry's early recovery

At present, the agricultural machinery industry is in a typical "three period superposition" - a period of shifting growth rate, a period of painful structural adjustment, and a period of digestion of early stimulus policies. Simply put, the entire industry is in a deep recession period, stimulated by 20 years of agricultural machinery purchase subsidies. The industry's demand has been extremely overdrawn, and the social ownership is huge. The per mu power ownership is at the global leading level (in 2016, China's per mu power ownership was already six times that of the United States), and the entire agricultural machinery industry lacks momentum.

The old driving force of the agricultural machinery industry - the marginal benefits of the agricultural machinery purchase subsidy policy have declined, so there is an urgent need to find new driving forces. According to the normal development law of the industry, the breeding and emergence of new energy requires a long process, perhaps four to five years, or even more than a decade. Large scale equipment updates and trade in are "short frequency and fast" means, which will quickly stimulate consumer willingness, enhance investment confidence, promote industrial upgrading, and may replace the agricultural machinery purchase subsidy policy as the new energy of the agricultural machinery industry.
The author believes that the effective combination of large-scale equipment updates and trade ins with existing subsidy policies can inject new momentum into the industry, promote early warming of the industry, and inject new resources into subsidy policies, which may prolong their lifecycle.
2. Positive for new machine sales, negative for the aftermarket

Large scale equipment updates are an investment behavior that can take a long time and have relatively slow results. However, as long as the policy of exchanging old for new is introduced and funds are quickly received, it will achieve immediate results. Therefore, it is recommended that agricultural machinery enterprises pay attention to this policy and the implementation policies issued by the country and local governments in the future.

Trade in involves both policy and market aspects. According to the information obtained by the author in the market in 2023, the sales proportion of tractors, rice combine harvesters, and high-speed transplanting machines for old to new trade is 60%, 85%, and 90%. This indicates that at the commercial level, trade in has become the main tool for sales, and it is almost impossible to complete sales without recycling old machines. However, this type of enterprise level trade in is often based on contributing to the profits of new machines.
A large-scale trade in policy will definitely have relevant supporting policies introduced, such as implementing dual subsidies for the old recycling process and the new machine purchase process. The supporting subsidy funds will reduce the financial pressure on factories and distributors, and improve the overall profitability of enterprises.
Overall, the purpose of exchanging old for new is to sell more new products. In order to increase the sales of new products, it is necessary to use policy measures to make old products exit the market in advance. Therefore, this policy is beneficial for the sales of new machinery, but not conducive to the post market, especially the trading and circulation of second-hand agricultural machinery.

3. Beneficial for enterprise equipment updates and enhanced productivity

The meeting pointed out the need to promote the updating and technological transformation of various production and service equipment, and to continuously increase the proportion of advanced production capacity. Among them, equipment investment, equipment transformation, and capacity upgrading are related to agricultural machinery production enterprises.
The update of internal equipment in enterprises mainly refers to guiding and helping enterprises to use more advanced, intelligent, and efficient equipment to eliminate old equipment. The key to achieving this goal is for enterprises to have money, where does the money come from?
On the one hand, it is to enhance the confidence and determination of enterprises in investment, allowing them to dare to invest with money; On the other hand, the country establishes some projects for upgrading production capacity and updating equipment, and indirectly invests money in enterprises through fiscal transfer payments; We also need to provide low interest loans for enterprise technological transformation projects and new investment projects. Of course, these policies will benefit large enterprises, while small enterprises find it difficult to have opportunities.
4. Beneficial for domestic brands, with little impact on imported products

The purpose of large-scale equipment updates and trade in is to stimulate consumer willingness, enhance investment confidence, and promote industrial upgrading. Overall, it is to stimulate domestic demand and promote internal circulation. Therefore, the beneficiaries of the policy will be domestic brands and foreign brands with a high degree of localization in domestic production factories, which are expected to have little impact on the products of pure imported brands.

5. Early release of National V emissions and rapid popularization of National IV emissions
The meeting reflected the need to better leverage the traction of energy consumption, emissions, technology and other standards.
Large scale equipment updates will definitely drive the technological leap of the industry. The country will adopt policy guidance and mandatory legal and regulatory measures to promote the rapid application of new technologies, as well as further restrict the use of old technologies and equipment, thereby accelerating the elimination of old equipment. The popularization speed of China's four machines will accelerate, and it will be possible for old machines in China's first and second countries to be forcibly eliminated, I believe that some places will introduce special measures to crack down on the manufacturing dens of underground second tier mechanisms, in order to create sufficient demand for more advanced machines
Some places have already taken action, such as the introduction of tax and fee trading policies in Shenzhen, which stipulate that the tax collection for second-hand effects will be strengthened. Currently, most transactions in the agricultural machinery industry are not included in the tax scope, and there may be relevant mandatory policies introduced in the later stage.
At the same time, cleaner emission standards, such as the National V emission standards for non road machinery, may be introduced in advance. Rapid iteration and upgrading of technology can not only promote the elimination of old equipment, but also create new demand, promote the cultivation of new technology production capacity, and increase the sales of new machinery.
6. Intelligent and electrified technologies may accelerate their implementation
On the one hand, the continuous acceleration of emission standards has made agricultural machinery enterprises unable to keep up with policy requirements in their products. On the other hand, the cost of high emission standard products has increased, and user acceptance is not high. This will drive agricultural machinery enterprises to pay more attention to new energy technologies such as hybrid and electric.
In addition, this policy will accelerate the pace of new energy vehicles going to rural areas. New energy vehicles going to rural areas will popularize infrastructure such as charging piles, and the infrastructure of electric vehicles can solve the problem of charging electric agricultural machinery, which will be conducive to the rapid popularization of electric agricultural machinery in rural areas.
In short, this round of large-scale economic stimulus policies, mainly focused on equipment updates and trade in, is highly likely to promote the elimination of outdated technologies and the popularization of intelligent and electrified technologies in the agricultural machinery industry.
7. It is possible to truly initiate the remanufacturing of agricultural machinery
Policies will have two sides. Both large-scale equipment updates and large-scale trade ins will encounter a problem, which is that old and old equipment will be centrally phased out in a short period of time, and most of these equipment have not yet reached the natural phase of elimination. Some of them may have high utilization value, and being directly phased out is a great waste of social resources, which will greatly discount the commercial value, livelihood value, and social value of this policy, So there will definitely be corresponding supporting policies.
The meeting pointed out the need to "implement a comprehensive energy-saving strategy, establish a sound recycling and utilization system, promote the remanufacturing of waste equipment, and improve the level of resource recycling."
Strong agricultural machinery enterprises should pay special attention to remanufacturing business. In developed countries in Europe and America, Keynesianism is also practiced when encountering economic problems, but there are also supporting policies. The remanufacturing business of engineering machinery, mining equipment and agricultural machinery equipment in European and American countries is a mature industry. Enterprises like John Deere and Caterpillar have strong remanufacturing capabilities and remanufacturing factories. These enterprises can make the performance of machines identical to that of new machines by remanufacturing the equipment recycled by exchanging old for new, and the price of remanufactured products is only 50% -70% of that of new machines, Reduce purchasing costs for users while minimizing pollution and maximizing social benefits.
There have been several discussions on domestic remanufacturing, and the government has also introduced some policies to encourage enterprises to develop remanufacturing businesses. Companies such as XCMG, Sany Heavy Industry, and Zoomlion Heavy Industry have established remanufacturing factories; Yituo and Lovol have also launched remanufacturing businesses in the agricultural machinery industry, but overall, whether it is engineering machinery or agricultural machinery, domestic remanufacturing has not reached a scale and has not formed industrialization.
This round of large-scale equipment updates and trade in will result in a large number of old equipment being centrally recycled. On the other hand, the country will have corresponding supporting policies to support the development and remanufacturing, rather than simply phasing out in advance. Therefore, remanufacturing business is highly likely to truly fall into place and achieve industrialization. Therefore, it is recommended that strong enterprises in the industry pay attention to this direction.