Tractors, India grows. Technical decline for other countries
In a 2022 characterised by the raw material crisis and the military conflict between Russia and Ukraine, all major world markets are reporting a drop in tractor sales. The drop is caused by cyclical factors, against a demand that continues to be lively. India bucked the trend, touching new records
The tractor sector in India continues to set records. Even with its global slowdown in sales, 2022 saw a new peak in the Indian subcontinent, with registrations reaching 912 thousand machines. The differential with 2021 is modest - in percentage terms, the sector gained 1% - yet it marks a new all-time high and further consolidates India's position as the world leader in agricultural machinery. India's figure is even more significant because it goes against the trend of the main countries, which recorded a moderate drop in sales compared to the peaks reached in 2021, with the exception of Turkey (+4.5% due to approximately 67 thousand machines sold). The contraction in global markets can therefore be considered not so much as a phenomenon of a structural nature, caused by a crisis in demand, but as a 'pause for reflection' after the record growth seen in past months. Although declining, sales volumes continue in many cases to remain at higher levels than in pre-pandemic years. This was the case in Germany, where 2022 ended with a total of 30,360 tractors. This figure, although down 11.9% over 2021, is still higher than the average for the period 2016-2019 (29,647 vehicles). Italy also closed the year with a drop, -17.1% at 20,217 units, but with a higher than average number of registrations, while Spain (-11.4% at 11,551 tractors) returned to the levels of 2019.
France and the UK, on the other hand, essentially confirmed 2021 volumes. While in France sales of agricultural machinery remained unchanged (-0.3% for 40,665 machines), in the UK the drop stopped at 3.6% with 11,580 units registered.
Remaining on the 'old continent', the tractor market trend in Russia is very interesting. According to findings of the Russian manufacturers' association Rosspetsmash, quoted by the US-based AEM, in the period from January to October, the Russian tractor industry does not seem to have been affected by the sanctions. In fact, sales of machinery not only did not fall, but increased substantially to more than 35,500 units, marking an increase of 21% compared to 2021.
On the other side of the Atlantic, however, market trends reflect those seen in the main EU countries. The United States dropped from 318 thousand tractors in 2021 to 271 thousand (-14.8%) in 2022, but remained well above the volumes referred to the average of the four-year period 2016-2019 (about 228 thousand tractors).
Finally, Canada (-7.2%) remains above the threshold of 31 thousand machines, a share never reached in the years preceding Covid.
The weight of cyclical variables. Over the course of 2022, the world market trend was not only characterised by what could be described as a 'benefit taking' from a record-breaking 2021, but was also affected by very unfavourable economic variables.
The international economic situation, which had already started to deteriorate in the second half of 2021 due to the resurgence of the pandemic, rising logistics costs, and inflationary pressures on raw materials, deteriorated dramatically with the start of the military conflict between Russia and Ukraine.
The war, as we know, has exacerbated the elements of tension already present in global markets, creating a very unfavourable climate for the agro-mechanical business. It was not only the sharp rises in the price of energy commodities that weighed heavily, but also the shortage of chips and electronic components, which are essential for the latest generation of mechanical equipment, that added to the shortage of other materials. Paradoxically, the crisis mainly affected the production side, as the demand for agricultural technologies, in many cases supported by public incentive schemes (in Italy and the USA, for example), continued to be dynamic and lively. Manufacturers coped with the emergency by resorting to stockpiling and adjusting price lists upwards.
These countermeasures were not always sufficient to avoid a slippage in orders. The association of British manufacturers, the AEA, for example, believes that the slight drop in sales observed in 2022 is due precisely to delays in the delivery of machines, which in several cases was postponed until early 2023.
The sentiment for 2023. Making predictions about the course of 2023 is a very complex undertaking. Indeed, the international geopolitical context is still characterised by very strong tensions.
In addition to the Russian-Ukrainian conflict, for which no solution is yet in sight and for which a truce does not even seem to be on the horizon, there are also the not very encouraging signals coming from the United States and China, which could herald a further deterioration of diplomatic relations between the two countries. And yet, despite the continuing political and economic instability factors, the last few months of 2022 saw an improvement in market sentiment, at least in Europe.
This was revealed by the climate survey that the European Committee of Agricultural Machinery Manufacturers, CEMA, conducted in the first month of the new year among its members.
The Business Barometer, as the CEMA survey is called, shows an increase in the business confidence index, which has returned to growth after the sharp drop caused last spring by the crisis in Eastern Europe. In fact, according to the forecasts of the majority of the companies surveyed by CEMA, the remainder of the year should see growth in both turnover and orders.
The recovery in orders is particularly significant since in the second half of last year demand for machinery had shown some signs of a downturn, although without losing that liveliness that has characterised its trend since 2020. In short, according to the results of the report signed by CEMA, the agro-mechanical sector continues to be conditioned by a number of unfavourable variables - first and foremost the difficulties on the logistics and procurement fronts that affect the tractor and harvesting machinery segment in particular - yet it may have metabolised the most acute fase of the price emergency and the geopolitical crisis.