The agricultural machinery market is shrinking due to the low profitability of farmers, but players from China continue to gain a foothold in the segment. The commercial director of Zoomlion Heavy Industry Rus in the field of agricultural machinery told Kommersant about the vision of the Russian market, competition and localization plans Rinat Amirov.
— How do you estimate sales in 2023?
— Despite the market decline, in 2023 we grew in key segments of tractors from 90 to 230 hp. With. by 8% compared to 2022. Currently our market share is 26%. Competition here is not only with Chinese players, but also with MTZ, the market leader.
- What about PTZ?
— PTZ operates in the segment of more powerful tractors.
— Did you take the market share of the departed players or mainly MTZ?
— The brands that left were largely present in more powerful segments, so we entered a niche where there was conditionally only one monopolist, and began to compete in it.
— What about the prices for equipment now?
— We continue to offer conditions that have been in effect since 2022 - both in terms of prices and financial offers. We did not increase prices for tractors that were imported before the recycling collection increase.
— Is this equipment still in stock?
— Yes, a significant part of the cars are there. But at the same time, we are working on the delivery of this year’s batches of tractors. Of course, the price for them will be higher due to an increase in the recycling fee - by 15–30%, depending on the capacity.
— Which segments will you focus on in 2024?
— Our focus is on the 90–160 hp segment. pp., the most popular segment. From the very beginning of our work, since 2020, we have been mainly working in it. Also in focus is the 230 HP PL2304 tractor. s., now let’s imagine this tractor with a front power take-off shaft (PTO.— “Kommersant”). This is a very popular option, especially relevant for livestock farming. We reach the niche of 180–200 liters. With. with the RG series tractor introduced at the end of 2023. This year we will improve it, add options and offer it with a front PTO.
— Why is your focus on tractors? Due to wear and tear of the park?
— Yes, and we first of all focused on the mass segment.
— But reapers and seeders are also large volumes.
— For now, we have identified our focus in self-propelled vehicles. We introduced the TF120 grain harvester in 2023. Regarding trailed equipment: Zoomlion Corporation acquired the European brand Rabe in 2020. This company has a hundred-year history of producing trailed implements, primarily plows. We have plans for the future to supply this equipment, but, understanding the specifics and logistics from Europe, we are not forcing the issue too much. Zoomlion has plans to partially transfer production from Germany to China and establish supplies from there.
— You are planning to bring the combine to the Russian Federation. Is this an entry into the segment where Rostselmash and Gomselmash are present?
— Yes, it is a very competitive environment. We are still moving in this direction with slow, careful steps.
— Do you feel competition from other importers from China? Still, a lot of them appeared, large warehouses were formed.
— According to Rosspetsmash, which we primarily focus on, there are about 26 players in our tractor niche. And about 10 of them are iconic brands, including European ones, which are parallel imports. We also observe that, according to unofficial statistics, about 50 Chinese and Turkish brands have already entered the Russian Federation. Most come in small batches. But they also claim a place in the sun. The market redistribution continues. Everything, I think, will settle down in five years. We are watching with interest.
— Do you notice wariness towards equipment from China due to cases where distributors cannot provide service?
— The most important thing here is the approach. We primarily focused on service. We are one of the few companies that is strengthening its technical support throughout the country.
— Do you have a spare parts warehouse in the Russian Federation?
— The central warehouse for agricultural spare parts is located in Moscow. Spare parts from there go to the stocks of our dealers, these are 33 companies in 75 regions. And we also have an additional warehouse in Ufa. This is the very first warehouse we opened. His main task is to work on warranty claims, and this is a significant volume of spare parts.
— Who are your major customers?
— Our client pool includes small farms with a land fund of 50 hectares, medium-sized enterprises, and large agricultural holdings. If we talk specifically about large ones, then these are companies that are well-known. For example, “Mordovian Bacon”, “Ak Bars Holding”, “Cinco”.
— Last year you discussed with the authorities of Bashkortostan the localization of tractors of the RN and RS series. Are you keeping these plans? What determined the choice of region?
— Of course, the plans are still in place and we are getting closer to their implementation. The region was chosen based on a number of factors. First of all, the headquarters of Zoomlion’s agricultural business is located in Ufa. Geographically, this is the center of Russia. The choice of location was also influenced by the attention of regional authorities, who are ready to help in the implementation of such large-scale projects. Now the site is being determined, internal discussions are underway together with representatives of the Chinese plant. For now, we are aiming to assemble a test batch, and therefore it is too early to talk about the start of serial assembly.
— Are you planning a contract assembly?
— This will be a joint venture, its creation is an initiative of Zoomlion.
— Why are you interested in production in the Russian Federation? Is this more profitable in the case of large-scale assembly than importing?
— First of all, we are interested in the Russian market. In 2022, we declared Russia as our second home region, and these are not just big words. This applies to equipment adaptation, dealer support, and financing. And here is localization. This will give us the opportunity to receive preferences and subsidies at the regional level. For us it is very important. And, of course, this is how we optimize supply chains.
Plus, any investment has a delayed effect, and we focus here on the future.
— Are there already plans for which operations and components will be localized?
“We first need to go through all the stages with test batches, which will give us the opportunity to implement this SKD project.
— What are your expectations for the recovery of the agricultural machinery market?
- You see, without tractors all work will stop. In Russia there is still a great need to update the fleet. And it will probably remain for a long time. The average annual market capacity in our tractor segment is 6–7 thousand machines.
— When will the market return to a situation where the rate of fleet retirement will be slower than renewal?
— Strengthening the opportunities of farmers will come at a time when there is a fair price for the crop. This is from what we hear from farmers. The situation will return when there are opportunities to purchase equipment at more preferential rates. You see, now with the increase in the key rate, restrictions have arisen. Farmers are finding it more and more difficult to plan their investments. But we, for our part, are doing everything possible. For example, last year, with the support of the plant, we offered farmers a subsidized interest rate. There was an opportunity to purchase tractors with a 0% increase in price per year. We still have the same financial offers. And even taking into account the increase in recycling collection, we are working on various financial instruments in order to still give more opportunities to our farmers.
— If the recycling fee is increased again this year, will the market slow down even more?
- Well, of course, I guess. This is still a limitation. Because imports are becoming more and more expensive. Farmers are already thinking again and looking for the most optimal offers. In any case, we will try to offer favorable conditions.
— So you are interested in increasing volumes in any case, will you sacrifice margin?
“That’s why we are exploring various options.” What we have voiced regarding localization and optimization of logistics schemes - all together will make it possible to offer favorable conditions for the purchase of our equipment.