Originally published by Interact Analysis. Written by Maria Georgiou.
You can contact her at firstname.lastname@example.org
From a global perspective, the COVID-19 pandemic had a dramatic effect on the commercial vehicle market as vehicle manufacturers and their suppliers cut back or shut down production as the virus hit and lockdowns were enforced across the world. Despite the COVID-19 impact, agricultural machinery is one market that saw strong performance in 2020 and it is expected to continue this trend for the rest of 2021, as food production and agriculture are treated as essentials. In this insight, an overview of the global agricultural machinery market is given for the 2020/2021 period, by highlighting the top 10 agricultural vehicles markets around the globe, the leading tractor markets and some key regional markets of the tractor market.
The global agricultural machinery market: A post-pandemic prediction
Whilst COVID-19 forced almost all agricultural machinery manufacturers to reduce their production or temporarily closed down their businesses and implement strict work practices to limit infection from the virus – the actual demand for machinery was relatively strong in 2020. This was mainly because food production and agriculture were treated as essential, so farmers had to continue activities as normal. Favourable government policies, good weather conditions and strong crop production in some countries, coupled with the growing mechanisation of agriculture and the need to replace ageing equipment, meant global machinery sales grew in many markets in 2020.
With more than 2.2 million units sold globally in 2020, the agricultural machinery market can be described as a COVID-19 survivor. This is around 5% higher than 2019 with the majority of this market growth coming from the APAC region, which accounted for 71.3% of the market in shipment terms, followed by North America (15.5%), EMEA (10.7%) and South America (2.6%).
By taking into consideration monthly registrations for tractors and combines on a global basis for the first half of 2021, Interact Analysis forecasts that 2021 will continue to be a strong year for agricultural equipment sales. Attractive low-interest rates, strong crop production and high crop prices mean it can be concluded that the good performance for agricultural equipment will continue for the second half of 2021. In addition, the longer-term forecast is expected to be positive as the rate of mechanisation increases in China, India and some other developing markets.
Top 10 agricultural tractor markets in 2019 and 2020
As global economies continue to reel from the effect of the COVID-19 pandemic, high demand for agricultural products and increasing farm mechanization rates in developing countries are driving the growth in the industry. The Asia-Pacific region is growing rapidly due to the increase in mechanization in countries, particularly in India and China, followed by Europe and North America. Additionally, government policies, good weather conditions and low interest rates are primarily driving the tractor market. As it can be seen in Table 1 below, the agricultural machinery market saw strong performance in 2020 for its biggest markets, despite the COVID-19 impact.
India: the leading market for the last five consecutive years, but COVID-19 a threat
India and China lead in the number of tractors sold by some significant margin. In detail, India is the world`s biggest tractor market with over 800,000 units sold in 2020, a position which it has continuously held for the last 5 years. But, is the Indian market under threat because of the recent new outbreak of COVID-19?
The Indian market remained unscathed up to April 2021 as the COVID pandemic raged within the country. Rural markets are leading the rebound even as many urban and semi-urban centres remain under partial lockdown.
Having a look at the level of sales during the first five months of 2020 and 2021, it can be seen that tractor sales remained robust, achieving a 67% growth in sales for the period. Nevertheless, CFO Bharat Madan of Escorts Ltd Group mentioned that “tractor sales will be impacted in the short term although in the second half of the fiscal they are likely to pick up”, which can explain the drop that is occurred in May 2021 as stricter COVID-19 restrictions were applied across different regions in India.
It remains to be seen if the remainder of 2021 can continue the momentum seen in the first half of the year. 2022 could also be quite challenging to sustain this strong growth trajectory unless the overall COVID-19 situation in the country stabilizes soon.
Outlook of key regional markets for the first five months of 2021
While the pandemic hit some of the key tractor markets, like China, France and Italy, some other markets have recorded thriving growth in the number of tractors sold and they continue to do well for 2021.
The Canadian economy is one example, as the low-interest-rate environment and the current crop conditions have raised producers’ incentives to revisit their equipment replacement plans and financing needs. According to AEM, total agricultural tractor sales rose 52.6% for the first five months of 2021 compared to the same period of 2020. Breaking down the equipment type, the biggest growth occurred in the small 2WD 40hp tractor segment, reaching 8,729 units sold for the first five months of 2021. Thus, Canadian agricultural tractor unit sales have extended their growth streak with a strong five-month period till today.
Based on AEA’s publications, the UK agricultural tractor market in the first five months of 2020 was adversely affected by the bad weather conditions and the impact of COVID-19 on supply chains. Production plants across Europe were temporarily closed and, even where they stayed open, supply chains were disrupted. Once the Coronavirus restrictions were eased and the weather effects diminished, the market picked up and registrations saw a significant increase in 2021. As a result, sales bring the year-to-date total up to 5,371 units, which is 21.2% higher than registrations in the January-May period of 2020.
In a similar manner, KBA announced that the German tractor market has seen 26,209 units sold year-to-date for 2021. Factors like superior productivity through mechanization, and labour deficiency, have led to the expansion of the agriculture equipment demand for Germany, as the shortage of labour has led to increased demand for tractors.
Turkey is one market that marked the most positive growth in 2020 and continues to do so in 2021. Turkey has a sizeable domestic production base for tractors that contributes to the market growth. Positive weather has also contributed to sustained demand for tractors.
In the first five months of 2021, total farm tractor unit sales are up 13.4%, compared to the same period in 2020 in the USA, as AEM publishes in May 2021. Growth factors included strong crop prices, government support and favourable weather. In addition, recent years has seen the average age of the tractor fleet increase. Favourable conditions to purchase mean that many purchasers are looking to upgrade ageing machinery.