2021, "ten knives" in the agricultural machinery industry
A year has passed, and 3 / 42021 has entered the countdown. According to the traditional sales situation of the agricultural machinery industry, the agricultural machinery industry as a whole has entered the closing stage, and the development trend has been basically finalized. There are only some sporadic transactions in the fourth quarter. Of course, the fourth quarter is a very busy quarter for the agricultural machinery industry. Because of the lag in the payment of subsidy funds everywhere, all enterprises are trying their best to get back the money advanced by (dealers) in advance.
Competition is the eternal theme. After 2019, when the agricultural machinery industry experienced a tragic experience, it was expected that 2020, when the epidemic hit, would become a year of counterattack for the agricultural machinery industry, making many enterprises make a lot of money. However, the market always makes black jokes. Shortly after entering the second quarter of 2021, some subdivided product fields turned around sharply. In addition, some tightening measures introduced by various localities in terms of subsidies increased the pressure on the agricultural machinery market in 2021. Until the end of the year, the agricultural machinery industry and enterprises were still under great pressure. In order to attract attention, Lao Zhu used "ten knives" in his title to describe the pressure and challenges encountered by agricultural machinery enterprises this year.
The first is the pressure brought by the rise in the price of raw materials. One of the prominent contradictions facing the economic operation this year is the high operation of commodity prices and the sharp rise in raw material prices, including iron ore, steel, copper and aluminum. Some commodity prices rose to record highs. China's commodity price index (CCPI) for March released by the National Bureau of statistics on April 27 was 176.78 points, up 39.7%, the highest in nearly a decade.
The price of raw materials remains high. For more than 80% of agricultural machinery products whose body is made of steel, the cost growth is obvious. The price of rebar was about 3700-3800 yuan per ton last year, but this year, the highest price per ton rose to more than 6000 yuan, with a maximum increase of more than 40%, which increased the cost of a conventional combine harvester by more than 10%.
The profit of agricultural machinery industry is thin, and the average profit margin of the industry for many years is less than 5%, even negative in 2019. However, despite the sharp rise in costs, it is difficult for the prices of agricultural machinery products to rise as reflected in the market terminal. In the face of farmers' consumers with very low consumption power, most agricultural machinery manufacturers have always only dared to reduce prices and rarely dared to increase prices. Otherwise, they may taste the pain of declining sales and be willing to fall in market share, that is, they are enemies with consumers.
In the field of tractors, due to the standardization of k-value management, the pressure of cost increase is more obvious for those enterprises that were good at "big horse pulling small car" in the past. The product needs to increase its weight. No matter what raw materials you add, it needs money, but it's unrealistic for you to raise the price.
The sharp rise in cost is accompanied by the pressure of price competition and profit brought by fierce competition. Many domestic agricultural machinery is already the price of cabbage, but the price of foreign brands with strong premium ability may be further explored out of the need of competition, which further compresses the profit space of domestic enterprises. The pricing power of domestic agricultural machinery enterprises is weak, coupled with the deterioration of price conditions, the enterprise profits are eroded and the operation pressure is further increased.
Second, the supply chain is under high pressure. This year, the supply chain in the physical field is facing two uncertainties: one is that the outbreak of the epidemic has caused the rupture of the supply chain in some areas and raised costs; the other is that the current global chip shortage has triggered a shortage in many machinery manufacturing industries. In this regard, the agricultural machinery industry is also subject to the impact of the sharp rise in costs on the supply chain The sanctions imposed by the United States on China's relevant high-tech industries have brought about the shortage and shortage of chips for agricultural machinery, which constitute the pressure of superposition. Although the agricultural machinery industry does not need high-end chips, it is also affected to some extent. The author has heard that some host enterprises say that the supply chain of engine enterprises is tight due to the lack of chips, which affects the distribution to the market.
The pressure of supply chain has an impact on agricultural machinery manufacturing enterprises and the whole industrial chain. The production scheduling of manufacturing enterprises is limited, which affects the order picking up of dealers. The agricultural machinery industry is an industry with a very long industrial chain. There are more than one hundred supporting providers, suppliers and service providers upstream and downstream of each manufacturer. A change in one link will lead to structural fluctuations in the upstream and downstream of the industry.
Third, the pressure of subsidy downshift on the agricultural machinery market. On April 30, the agricultural mechanization station of the Ministry of agriculture and rural areas released the announcement of the maximum national subsidy for general agricultural machinery from 2021 to 2023. As the most important leading product in the agricultural machinery industry, wheeled tractors bear the brunt. 160-180 HP tractors decreased from 80700 yuan in the previous subsidy cycle to 45700 yuan, and four-wheel tractors with 200 HP and above decreased from 129600 yuan in the previous subsidy cycle to 63200 yuan, The adjustment range is close to 50%! Much more than many people expected. Some places also have accumulated subsidies, which have been basically cancelled this year.
We know that the subsidy standard is a huge lever to leverage farmers' consumption. The sharp decline of the subsidy standard naturally has a strong impact on Farmers' purchase psychology and triggered a phased depression in the market. The situation that the tractor market suddenly fell precipitously after May is clear.
Fourth, the advance overdraft of subsidy funds has brought pressure to the market. Over the years, the subsidy funds of most provinces were insufficient, and it was common to live beyond their means. Last year, many provinces spent more than the subsidy funds of that year. In other words, the subsidy funds of a province spent more than $2.3 billion last year, which created a recent wonderful work (changing the subsidy standard of last year this year) and attracted attention. Under great pressure, in order to ensure more shipments and scale, many enterprises and dealers will reduce the sales price of the whole machine, forming a double sword with the rise of raw materials and operating costs.
Fifth, the pressure of stricter subsidies and related appraisal management means. In this regard, the most obvious are the introduction of tractor k-value management at the beginning of the year and the elimination of non-standard test reports for some enterprises. Of course, strict management is a good thing, which is conducive to protecting enterprises that abide by rules, management norms and focus on long-term development. It is good for the long-term healthy development of the industry to prevent "bad money driving good money". Big horse pulling trolley, big tooth sleeve and small stomach all affect the healthy development of the industry. Some enterprises always want to take shortcuts or crooked roads, but once they go too much, the final problem will naturally break out. However, because management will have a certain lag effect, market players also need an adaptation process. For example, some enterprises will feel some pain in a short time due to the delay of adopting some testing agency reports with too much water and new product identification.
Sixth, stricter environmental protection management increases enterprise costs and supply chain pressure. Since this year, some leading provinces in the agricultural machinery industry, such as Shandong and Jiangsu, have been stricter in the management of environmental protection, which directly affects the price of agricultural machinery products as industrial products. The agricultural machinery industry includes not only steel and non-ferrous metals, but also tires, tape and other parts. Some local officials adopt a more rough management method to manage enterprises in the region "across the board". A friend in Shandong told me that all local casting production enterprises were shut down, which directly increased the pressure and risk of the enterprise's supply chain.
There are many unforeseen factors in the operation of enterprises. Since the third quarter, the pressure of carbon reduction assessment on local governments has also been transmitted to enterprises. The recent power cut-off not only makes business owners and even ordinary people nervous, but also becomes a dark cloud in their hearts. The adequacy of electricity also constitutes an important factor for the sustainable and healthy operation of the agricultural machinery industry in the fourth quarter. Especially for products like rice transplanters, the end of the year is the climax season for goods preparation.
With the increasingly stringent environmental protection regulations, "carbon peak and carbon neutralization" also pose new challenges to the agricultural machinery industry. China has made it clear that it will strive to achieve carbon peak by 2030 and carbon neutralization by 2060. But this requires hard work. The power resource consumption of agricultural machinery industry is relatively high. When the "double carbon" goal is anchored, the production standard process flow of relevant enterprises in each link of the supply chain may be affected. In addition, the environmental protection management is more strict, and agricultural machinery enterprises also need to pay more EIA costs in the newly put into operation workshops.
Seventh, the pressure of destocking. At the end of last year and the first half of the year, some agricultural machinery manufacturers accelerated their efforts to distribute goods to the market out of the overall expectation of this year's market and the pressure of digesting the rising costs. However, due to the slow opening of local subsidy systems, a large number of products are still overstocked in the market circulation, occupying a large amount of funds of dealers. Since it is a "grasshopper" on a rope, this pressure will naturally be transmitted to the main engine plant and upstream suppliers.
Eighth, the rise of management costs. In recent years, the labor cost and operating cost of agricultural machinery enterprises have continued to increase. The salary level of personnel, the cost of water, electricity and oil, travel, transportation and accommodation, and participation in exhibitions and activities are not small expenses. Since the beginning of spring this year, the difficulty of finding workers has become a difficult problem for the whole industry and China's manufacturing industry, triggering a people grabbing war among regions and enterprises. Naturally, the result is the rising labor cost. In some inland areas, the monthly wages of workers in many enterprises are up to 6000 or 7000 yuan, and the wages of an electric welder in Hebei are about 12000 yuan.
Ninth, the export of agricultural machinery is under pressure. COVID-19, which is not going back, has global geopolitical tensions. The price of shipping has surged ten times this year. The import and export of agricultural machinery is mainly based on sea transportation. The frequent epidemics of foreign countries also make logistics and transportation often fall into a passive situation.
Tenth, the impact caused by Heilongjiang's refund and compensation. Since September, the refund and compensation event introduced in Heilongjiang has been making a storm in the industry. In name, the refund is for dealers to refund, but the manufacturer is involved, and the larger the enterprise, the greater the impact. According to the documents issued by six departments including Heilongjiang agricultural and rural department, in 2020, 160-180 wheelbarrows will be compensated by 40400 yuan, 180-200 by 54800 yuan, and those with more than 200 horsepower by 60700 yuan. According to the calculation of 110900 for a tractor with more than 200 horsepower in Heilongjiang last year, it is equivalent to a refund of more than 50000 yuan for related enterprises or farmers.
The iron fist of refund and compensation hit the dealers, but the pain was transmitted to the host enterprises and the upstream parts industry chain. Everyone knows the importance of Heilongjiang to domestic agricultural machinery enterprises and agricultural machinery market. In 2020, the subsidy sales of wheeled tractors in Heilongjiang Province alone reached 70000 units, and one province accounted for 1 / 6 of the country. In order to sell more, many dealers have actually given part of the profits to users. If they are allowed to return the money falsely opened on the book, many local dealers will go bankrupt or fall into the brink of bankruptcy, which naturally affects the payment collection of upstream manufacturing enterprises.
This year's move in Heilongjiang Province is tantamount to a drastic draw for many dealers in the province, and may also affect the overall development of the national agricultural machinery industry and agricultural mechanization. Although the impact of the implementation degree or progress of this matter on the local and national agricultural machinery market needs to be further observed, Lao Zhu believes that in addition to the pressure formed by this wave, once the agricultural machinery sales channel in Heilongjiang Province is severely damaged, the local agricultural machinery sales and even the agricultural mechanization industry chain will be worried next year. After all, the follow-up service of the manipulator, the purchase of accessories and the maintenance and replacement of old machines are inseparable from the local dealers. The risk faced by the agricultural machinery industry chain will be a more terrible word - food security.
Postscript: in 2021, the agricultural machinery industry is the most difficult year for cost digestion and transfer. It is also a year to test the enterprise's cost control ability and risk aversion ability. It is a year for enterprise leaders to suffer. Of course, judging from the current situation, the entrepreneurs and operators in the agricultural machinery industry have extremely strong hearts and strong adaptability. No matter how difficult and bad the external environment is, they have not been defeated. Lao Zhu, as a member of the agricultural machinery industry, really admired and thanked the leaders and soldiers of agricultural machinery enterprises for their spirit of fighting and suffering!