The European agricultural mechanization sector will undergo significant changes over the next decade. Increasing competition from Asia and significant investments in developing new technologies are forcing the sector to adapt. This will lead to increasing consolidation in the coming years, according to RaboResearch in a study on the impact of changing farmer needs, new technologies, and growing competition on the European agricultural mechanization sector.
The European mechanization sector comprises some 6.000 agricultural machinery manufacturers across the continent. Of these, 115 companies employ more than 250 people. This group, which represents barely 2% of the total number of companies, generates a turnover of €49 billion, representing over 70% of total sales (approximately €67 billion) in this sector.
Small and medium-sized enterprises, in particular, will feel the impact of the changes in the coming years. Due to their scale, they are primarily affected by rising labor, energy, and steel costs. However, demand for machinery will no longer increase in the coming years, according to Raboresearch. Machine replacements will continue, but fleet expansion will be limited. Production volumes will remain largely stable because demand in terms of quantities is not growing, the bank's research department expects.
Growth in the sector must be sought in increasing the added value of the machine. Machines that deliver cost savings or better meet sustainability and stricter regulations. This leads to more expensive machines, not necessarily more machines.
High investment costs in developing new technologies are forcing companies to further scale up production and purchasing. Increasingly, startups are being acquired, as these companies are often at the forefront of new developments in the field of robotics and smartfarming.
Increasing competition
Companies that build simpler and smaller machines are facing increasing challenges. Competition in this segment is intensifying. This is due to a sharp increase in imports of agricultural machinery from China and India. These companies are increasingly adept at navigating European hurdles such as emission standards, dealer networks, and brand loyalty.
Due to their low production costs, competition from these suppliers is rapidly increasing. This development is also clearly reflected in the sharp increase in the number of exhibitors from China and India at the leading agricultural trade fair Agritechnica. The import value of machinery from these countries has also risen significantly in recent years. The import value of agricultural machinery from China and India now exceeds €1 billion.