Is price contributing to the tractor sales decline?
This slowdown has, in turn, reduced the figure for the number of tractors registered so far this year to 1,689 units in total, 11% down on 2021.
Combines and loaders
Combine harvester sales are also dramatically affected, down by just over one third from last year, a figure which hardly reflects the increase in crop prices, although of course it will be argued that input prices are also up by a fearsome margin.
The market for new telescopic loaders, however, remained strong, standing at 80 units for July. This represents an increase of 35% compared with July 2021, and the overall year-to-date trend shows an improvement of 12% to 377 units in 2022.
Other wheeled loaders showed a slight decrease of three units, down to 18, although the trend for the year still shows a 3% uptick.
The tractor sales puzzle
The FTMTA presents these figures with little analysis other than a few notes on the performance of the sectors compared with last year.
It does, however, claim that “the latest FTMTA Statistics Service Report for July 2022 shows the continuing impact of disruptions to global supply chains on the numbers of agricultural tractors being registered in Ireland. There remains a strong demand for new tractors on the Irish market”.
Which, on the surface would appear to sum up the situation nicely, but how plausible is it as an explanation as to what is happening in the market?
Usual reasons for price hikes
It might well be the case that shortages and delays in the component supply chain are creating hold-ups on the assembly lines, but this has been going on for over two years now – plenty of time for manufacturers to develop mitigation strategies to soften the blow.
If it is purely a lack of tractors that is causing reduced sales, then why is that telescopic loader sales can actually increase as they share the same sort of components?
We might also note that a similar situation is present in the US where tractor sales can be described as stagnant at best.
Tractor price is still a major factor
So what other factors might be involved? Well the obvious one is price, and here we have some very dramatic increases indeed.
Looking at just one single example of a 145hp tractor from a major manufacturer, we see that it has been blessed with a €29,000 price increase over last year. Rising from around €120,000 to €149,000.
This 24% increase in price will no doubt be blamed on raw material and component costs, with the higher price of energy thrown in for good measure.
Few tears for the manufacturers
Yet do we see the major manufacturers rummaging amonsgt the bins looking for their next meal? Not a bit of it; over on the investor relations side, it’s all talk of increased revenues and profits, especially the healthy margins to be had at the high-tech end of the business.
This leaves us in a situation where manufacturers are declaring increased profitability on reduced unit sales, suggesting that it is the margin per tractor that is keeping them from poverty.
Big corporations are in business to make money for their shareholders and they make no apology for that. If a larger profit can somehow be made from a reduced sales volume, then that is the course they will pursue.
Yet, such a strategy carries the risk that sales will eventually collapse and then prices will have to drop, a tricky task to manage without upsetting those customers who purchased at the higher price.
Be ready for discounting
The time-honoured methods are to introduce new models into the range at a lower price, thus avoiding a direct comparison with the older machines, or quietly provide discounts for the dealer to pass on, leaving the window sticker-price unchanged.
Once a certain price point has been reached and customers are willing to accept it, then there is a great reluctance to drop it, in which case farmers should simply keep their books shut until the decision to buy is helped by an easing of the price.
There is every chance that this is precisely what is happening.
