Forecast of The Situation in The Tractor Industry in 2024

Tractors are the most representative agricultural machinery and the engine of a country's agricultural machinery industry. Tractors are also the wind vane of the agricultural machinery industry. To a large extent, the prosperity of the tractor industry is the prosperity of the agricultural machinery industry. Other categories, especially agricultural machinery, will benefit from the pull of the tractor industry, and vice versa.

So what should the tractor market look like in 2024? I believe this is a concern for many tractor production enterprises, including many people in the agricultural machinery industry. Standing at the starting point of the new year, the author makes a prediction for the market situation of the tractor industry in 2024.

1、 Subsidy policy prediction: positive or negative?

The biggest impact on the agricultural machinery industry is the subsidy policy. Since the implementation of the national subsidy policy in 2004, the domestic agricultural machinery industry has lost some independence and autonomy, and demand is no longer the main force determining the market. Subsidy policies are the key.

At present, the national agricultural machinery purchase subsidy catalog includes 12 major categories, 48 subcategories, and 175 items, with the largest category being tractors. More than 95% of domestically sold tractors are sold through the subsidy system, which means that tractors rely more than 95% on subsidies. Since the subsidy began in 2004, tractors have always been a key subsidy product and have never been absent, indicating the importance of tractors and the serious dependence of tractors on subsidy policies.

The attitude, intensity, amplitude, and scale of subsidy policies have a huge impact on the market of tractors. Simply put, as long as the subsidy policy is "friendly" or even radical towards tractors, the tractor market will enter a period of prosperity. If the subsidy policy is "unfriendly" towards tractors, the tractor market will enter a period of depression or even freezing point. Therefore, if enterprises and individuals engaged in tractor business do not attach importance to the subsidy policy, they will undoubtedly be "blind people riding blind horses, facing the abyss at night" when formulating new year's business plans, and the degree of danger is clear at a glance.

Will the subsidy policy for tractors in 2024 be "friendly"? "Unfriendly" or "neutral"? We can learn a little from the recent policy measures related to subsidies:

Firstly, the subsidy policy in 2024 will continue and there will be no significant changes in the policy. The subsidy funds for the purchase of national agricultural machinery in 2024 have been distributed to various provinces, autonomous regions, and planned cities through fiscal transfer payments in November. Many places have already distributed the subsidy funds to local finance, indicating that the subsidy policy is "nephew playing lantern - taking care of uncle (old)". Undoubtedly, keeping the overall direction of subsidy policies unchanged is the greatest comfort for tractor enterprises. The changes in subsidy policies will undoubtedly be the first to be affected by tractor products and the enterprises and practitioners behind them. In the absence of major dividends, stability is the greatest dividend.

But the unfriendly direction of subsidy policies will continue. Starting from November, some major tractor consuming provinces have issued notices on the adjustment of agricultural machinery subsidy policies, with a targeted focus on tractors being "Sima Zhao's Heart - Everyone Knows It". Overall, this is still a downward adjustment, in order to complete the task of reducing the subsidy ratio for tractors to within 15% within three years as required in the "Guiding Opinions on Agricultural Machinery Purchase Subsidy Policies for 2021-2023". For example, starting from November 1st, Qingdao City, Inner Mongolia Autonomous Region, Anhui Province, Jiangxi Province, Shaanxi Province, Hubei Province, Tianjin City, Henan Province, and other provinces have lowered the subsidy amount and ratio for tractors. Overall, this is to achieve the target of 15% by the end of the year.

So in terms of the subsidy amount for tractors in 2024, the vast majority of regions nationwide will adjust it to within 15%, which is a certain information. The high subsidy period for tractors has come to an end, and there will also be structured dividends. For example, it is highly likely that some provinces and regions will introduce local subsidy policies for power shift, CVT tractors, or hilly and mountainous tractors. Enterprises that have completed factory certification in 2023 may enjoy additional subsidies.

However, the overall direction of subsidy policies is still being "suppressed" and adjusted. Since the subsidy policies for tractors in 2024 are generally negative, the entire industry will also lack vitality and popularity.

2、 Market forecast: will it rise or fall?

Let's first review the sales of the tractor industry in 2023. 2023 is a very special year due to the implementation of the fourth stage emission standards for non road machinery and equipment in the first year. On the one hand, the prices of National IV tractors have generally increased by 10-30%, artificially raising the consumption threshold for users. However, in terms of usage value, National IV tractors are not higher than National III tractors. Price increases without value added will suppress purchasing enthusiasm. Of course, there is also the crazy overdraft of National III tractors on the market in 2022, as well as the "unfriendly" subsidy policies. Overall, the sales of National IV new tractors in 2023 are very poor. According to data from the National Bureau of Statistics, the production of large and medium-sized tractors with a power of 25 horsepower or more by large-scale enterprises from January to November was 330000 units. According to the subsidy system, the production of National IV new tractors from January to November was 330000 units. The subsidy input for the four machines is about 200000 units, which shows that the sales of tractors are declining in 2023, and the actual sales rate is very low.

With an understanding of the overall situation of the sales machine market in 2023, we can now predict the bottom and foundation of the tractor market in 2024.

Firstly, it is known from the first part that the subsidy policy continues to maintain an unfriendly tone, and even the subsidy ratio for large and medium-sized tractors has been nationwide adjusted to within 15%. The actual impact of the subsidy policy in 2024 is even more unfavorable. In addition, more than 100000 National IV inventory vehicles will be transferred to 2024. Of course, it is also necessary to consider that some National III vehicles that have already been invoiced and reported but have not actually been sold will also be transferred to actual sales in 2024. Therefore, the combination of multiple negative factors makes the tractor situation in 2024 not optimistic.

For the tractor market in 2024, several major factories have recently held business annual meetings, and the information revealed from them shows that companies also hold a pessimistic attitude towards the 2024 market. I have asked some experts, and very few hold an optimistic attitude. Most people believe that it will be on par with 2021, which means that the sales of the entire industry can reach 350000 units. I agree with this viewpoint because there are special circumstances in 2022 and 2023, Both skyrocketing and plummeting are related to policies, and in 2024, after smoothing out special policy factors and returning to normal conditions, achieving the level of 2021 would also be considered a return to the market.

3、 Competitive landscape prediction: centralized or decentralized? Who are the unstable factors?

For this topic, we can understand it this way: from the perspective of the overall trend, the concentration of the domestic tractor industry will increase, which is a high probability event. If there is no significant change in subsidy policies, this trend should not be changed. From January to October 2023, the cumulative sales of CR10 in the industry were about 300000 units, accounting for 71%, an increase of 8 percentage points compared to the same period last year. Among them, the combined market share of Yituo and Lovol was about 50%, indicating a clear trend of oligopoly.

The general trend is a law that cannot be changed, but in 2024, the domestic tractor industry will still present a phenomenon of oligopoly and "long tail effect" coexistence. The number of tractor production enterprises will not significantly decrease, and at the same time, the concentration of the industry will increase, which means that the market share of several leading enterprises in the industry will further increase.

This is closely related to the "Generalized System of Preferences" nature of subsidy policies. The current subsidy policy implements equal subsidies, such as 140-160 horsepower power tractors priced at 300000 yuan for multinational brands, 150000 yuan for domestic first tier brands, and 90000 yuan for Shandong low-end brands. However, the national subsidy is uniformly priced at 23200 yuan. In this situation, many users will choose models with lower prices and relatively higher subsidies, leading to the phenomenon of "bad coins driving out good coins", and large enterprises cannot eliminate competitors through market-oriented means, There will be a unique phenomenon of oligopoly and long tail effect coexisting.

Of course, there is no need to argue that there is an annual demand for 500000 tractors in China, and there are still 260 tractor brands, which empirically demonstrates that the domestic tractor industry is in a weak competitive state. The state of "large enterprises are not small, small enterprises are not small" will persist for a long time, and this competitive situation is beneficial for new entrants.

Wang, Hou, General, and Prime Minister, would you rather have seeds? As long as the industry is not completely fixed, there are opportunities for small and medium-sized enterprises and new entrants.

While the "Matthew effect" and "long tail effect" coexist, there will still be some unstable factors in the domestic tractor market in 2024, such as the competition between Weichai Lewo and Yituo Dongfang Hongjianghu for the top spot.

In 2023, it was reported that Weichai Lewo's tractor sales exceeded that of Yituo Dongfanghong. This means that Yituo is about to lose its position as the leader of domestic tractors. For Yituo, losing its position as a leading player in the tractor industry will result in a significant loss. This is a strategic loss, and Yituo will definitely do its best. For Lovol, once it has it, it does not want to lose it. In addition, in 2024, Lovol will fully push for an IPO, Tractors and wheat harvesters are the largest pillars of scale, and Lovol may not be able to retreat, so it will inevitably fight to the death. Therefore, in 2024, the Eastern Red Army will be the attacking side, and Lovol will also launch a counterattack. The two powerful forces will engage in close combat on the main battlefields of Central Plains, Northeast China, Xinjiang, and other regions. The battle between the two giants will inevitably trigger a chain reaction in the entire industry, which is highly likely to be a "fight between immortals and suffering for the people.", The competition between two top companies for the top spot will trigger a major reshuffle in the industry, and the result of the competition may be that the two companies will become stronger, while a large number of small and medium-sized enterprises will be eliminated. Therefore, small and medium-sized enterprises cannot view the lion king competition between Lovol and Dongfang Hong with a lively attitude, but rather how to profit from mixing up.

4、 Technical direction prediction: Who is the main waterway? Power shift? CVT? Electric?

Choice is more important than effort. If you go in the wrong direction, the faster you run, the farther away you are from your goal.

2024 is highly likely to be a watershed for domestic tractor technology routes, as different enterprises may face vastly different fates and outcomes due to choosing different technology routes, as choice is more important than effort.

For tractor production enterprises in 2024, there will be the following technical routes this year: synchronizer shifting, power shifting, CVT, hybrid oil electric, pure electric, and engineering machinery.

What technology routes have different enterprises chosen, and which technology route will become mainstream? The strategy of a company is to make choices, and choice is more important than effort. No company can do these types of products well, and accurately judge the industry trend is the most important for the company.

In theory, there is no distinction between high and low technology routes. The reason why we consider a certain technology to be advanced is only from the perspective of the manufacturer. A good technology route should be able to improve efficiency, reduce costs, and be easier and more convenient to use. Sometimes users need advanced technology, while others prefer backward technology.

From the 2023 Wuhan National Conference, it can be seen that although the technical route of tractors is a bit chaotic, different enterprises still have biases. For example, when towing, they tend to shift gears steadily, while Weichai Lewo relies on Weichai's heavy truck supply chain to forcefully attack CVT. Meanwhile, emerging brands such as Yingxuan, Ward, and Junmadao will hope for lane changing overtaking in hybrid or pure electric vehicles, Some small and medium-sized enterprises that do not have the ability to develop power shift and CVT want to tap and expand the potential of mechanical transmission models, and strive to expand as much as possible. Currently, some enterprises have developed a 380 horsepower shuttle shift heavy-duty tractor with Fiat chassis.

It is difficult to say which technology route can be developed, but there are some trends that may be judged. In 2024, Lovol will definitely strongly promote CVT tractors, and the supporting system will be familiar and mature. A group of Weifang brothers do not know if they can benefit from the Lovol CVT supply chain dividend this time. According to the author's inference, it will be difficult because the manufacturing of core components will be placed internally by Lovol or rely on the supply chain of Weichai heavy-duty trucks, In terms of internal supply chain, in the CVT era, the Weifang tractor industry cluster is highly likely to turn from prosperity to decline, which will be a technological reshuffle and a complete reshuffle.

Conclusion: The real changes in the tractor industry will begin in 2024, with Weichai Lewo and YTO Dongfanghong as the main variables. Other enterprises and supporting systems will be the secondary variables. A technology elimination competition will officially start in 2024 after a preview in 2023. In addition, the author intentionally ignores the import brands of multinational companies, which is not unimportant because European and American companies are currently adopting a defensive approach in the Chinese market, It is a very definite invariant and has little impact on the development trend and competitive landscape of the industry, so no special analysis will be conducted.

Although the protagonist of the tractor industry has already appeared in 2024, the ultimate winner is still uncertain. In theory, anything is possible.