Reasons for the low-level operation of the agricultural machinery market in 2024 and expectations for the market trend in 2025

Ten miles west, the ripe rice fragrance lingers, the hibiscus flower fence falls, the bamboo strands are long, and the hanging mountain fruit hangs green and yellow

The exquisite poems of the Song Dynasty poet Fan Chengda have been passed down to this day, and the magnificent harvest scenes of the ten thousand mile land are reflected 

in this beautiful poem, radiating the atmosphere of the new era.

In 2024, it will still be a year of peaceful harvest, with grain production reaching a new high. Modern agricultural equipment will play a significant role in assisting, and the process 

of agricultural modernization will be further advanced.

Unlike the vibrant scene of agriculture, the agricultural machinery and equipment industry still continues to operate at a low level, and the market performance is exceptionally 

bleak. Whether it is traditional or emerging agricultural machinery categories, there are very few that are eye-catching. What is the root cause?

5 reasons for the low operation of the agricultural machinery market in 2024

The "Golden September and Silver October" are coming to an end, and the agricultural machinery market is almost certain for the whole year. We will study the reasons for the 

low operation of the domestic agricultural machinery market from multiple dimensions and perspectives.

01 Macro environment is complex and ever-changing

2024 can be described as a turbulent year for the international political situation, with the ongoing conflict between Russia and Ukraine, the resurgence of the Israeli Syrian 

conflict, the clash between North and South Korea, and the collusion between Europe and America to bully others

The global geopolitical situation and trade relations remain tense, and an economic downturn is not surprising. According to a report on the international situation by the Chinese 

Academy of Social Sciences, the main global economic performance in 2024 is as follows:

Firstly, the global economy continues to decline, and the growth differentiation of major economies intensifies;

Secondly, global trade and investment growth is sluggish, and geopolitical impacts are becoming increasingly evident;

Thirdly, global inflation has eased to some extent, but pressure and challenges still exist;

Fourthly, the high-level game between major powers continues, and the international system is accelerating its restructuring.

Faced with the complex international political and economic situation, China has introduced a package of macroeconomic regulation policies to ensure the smooth operation of 

the overall economy. However, there are many difficulties to be solved, such as the supply-demand structure, including the structural surplus on the production side, the sluggish 

demand side, especially the prolonged period of insufficient consumption, and the challenges faced by industries such as real estate.

Taking into account various factors, it is not surprising that any industry experiences development fluctuations in the face of the complex global macro environment.

02 Industry Adjustment Cycle

The agricultural machinery industry is in a cycle of upgrading and adjustment, which is not a new topic, but the prolonged low-level operation has surprised many people.

As is well known, since 2015, the development of the agricultural machinery industry has entered a period of upgrading and transformation with the national supply side reform, 

and the industry's growth rate has entered a slow period. Looking back at the operating trajectory of these years, it is not difficult to find that market downturn has become a 

common term among industry insiders.

After a continuous decline in the overall market size in 2016/2017, there was a rare double decline in industrial revenue and profit in 2018, and the extent of corporate losses 

increased.

Since 2019, it is reasonable that the market has not been boosted enough due to the impact of the epidemic.

Although the implementation of the "National III to National IV" emission upgrade policy for power machinery in the agricultural machinery industry in 2022 has achieved a small 

sales peak in recent years, it has also led to market overdraft and sales decline in 2023 and 2024, indicating a clear downward trend in the industry.

From the current operation of the industry, it can be seen that the cycle of adjustment in the agricultural machinery industry is still lengthening. Not only in 2024, but also in the 

coming years, the low-level operation characteristics of the agricultural machinery market will continue.

03 Low demand side

According to the basic concepts in economics, there are three pillars of economic development: investment, consumption, and exports. From an expenditure perspective, GDP is 

the sum of final demand - investment, consumption, and net exports. ‌

From the macro perspective, real estate and its industrial chain (including finance, wholesale, building materials, home decoration, etc.) account for nearly 30% of China's GDP, 

real estate investment accounts for about 50% of the whole society's fixed assets investment, while manufacturing investment accounts for about 30% of the whole society's fixed 

assets investment.

From a fiscal perspective, state-owned land transfer revenue and real estate special tax revenue are important sources of income for local governments, accounting for over 30% 

of local fiscal revenue, and land transfer revenue accounts for over 80% of local government fund revenue.

For several consecutive years, the government has implemented macroeconomic regulation on the real estate sector to curb the rampant rise in housing prices and the spread of 

speculation.

According to the National Bureau of Statistics, from January to July 2024, the total investment in real estate development in China was 6.1 trillion yuan, a year-on-year decrease 

of 10.2%; The newly started construction area of houses nationwide was 440 million square meters, a year-on-year decrease of 23.2%.

After talking about real estate for a long time, I actually need to talk about the impact of this industry on public consumption and other industries, especially the agricultural 

machinery industry.

As we all know, real estate is a typical labor-intensive industry that requires a large number of workers, especially migrant workers, in infrastructure construction and subsequent 

decoration and renovation processes.

If there is any turbulence in the real estate industry, there will be a vibration in social employment, and changes in public income will inevitably affect consumption.

According to data from the National Bureau of Statistics, the number of migrant workers engaged in the construction industry decreased from 55.577 million in 2021 to 

45.82 million in 2023, a decrease of 9.757 million in two years, with a decrease of 6.5 million between 2022 and 2023.

In this sense, it is difficult for farmers to find work and earn money, and their income from solely relying on farming and grain production is generally low. Unless they are 

cooperatives or large-scale land contractors, it is difficult for small farmers to achieve high income through farming. While solving the problem of food and clothing is not a 

problem, investment consumption will be cautious.

As a result, the phenomenon of insufficient purchasing power among users and sluggish demand in the agricultural machinery industry emerged.

04 Supply side surplus

The phenomenon of oversupply in the agricultural machinery industry has also existed for a long time.

Taking the tractor as an example, according to the current manufacturing system, the annual production capacity of domestic manufacturing can reach 800000 to 1 million units.

However, what are the actual annual market demand and sales volume? It's 300000 to 400000 units! When supply exceeds demand, market competition becomes intense, with 

some companies sacrificing product quality in order to reduce costs and increase profits.

According to statistics, in 2023, there will be over 2200 enterprises above designated size in China, with a main business revenue of 242.8 billion yuan; Domestic agricultural 

machinery manufacturing enterprises are capable of producing over 4000 types of agricultural machinery products in 14 major categories and 50 minor categories; The number 

of domestic agricultural machinery has reached 200 million sets, with a total power of over 1.1 billion kilowatts. It is undoubtedly the world's largest producer and user of 

agricultural machinery.

After years of industrial progress, the achievements of China's agricultural machinery industry are evident to all. Although there are still shortcomings in some intelligent and 

large-scale agricultural machinery products, components, core control technologies, and other fields, it can fully meet the mass demand of users, and a pattern of oversupply of 

traditional agricultural machinery categories has been formed.

Set the time to 2022, which can be considered a landmark year for the agricultural machinery industry. With the implementation of the "National Three to National Four" policy for 

power machinery, the upgrade of power agricultural machinery engines, mainly represented by tractors, harvesters, and other products, has been fully launched. Not only has the 

cost of the engine increased, but factors such as adding urea to the engine have also led to an increase in the overall operating cost of the machine.

So, manufacturing companies increased their promotion and production capacity of "National III" products, which suddenly overdrawn market sales and inevitably formed 

inventory.

05 Insufficient subsidy policy stimulation

In 2024, there are three aspects of agricultural machinery purchase subsidies that will have a significant impact on the market:

Firstly, the subsidy policy was launched relatively late. This year marks the transition period between the old and new three-year subsidy policies, coupled with changes in the 

leadership of the policy regulatory department, resulting in a serious lag in policy implementation.

Secondly, there is insufficient subsidy funds in many regions, and some annual subsidy funds have already been used up, which has a negative impact on the market.

Thirdly, some provinces' subsidy systems have been closed, affecting the product allocation and other related work of agricultural machinery enterprises.

Forecast of Three Major Trends in the Agricultural Machinery Market in 2025

The sun and moon suddenly do not flood, and spring and autumn follow in sequence. "Mr. Qu Yuan expressed his feelings about the passage of time and the alternation of 

spring and autumn in" Li Sao ". Since ancient times, the footsteps of time have been rushing forward, never stopping for a moment. People can only throw all their experiences 

into the past and embrace a new future with hope.

What kind of changes will occur in the agricultural machinery market in 2025?

01 Expected to stabilize and gradually rise

According to the development cycle of the agricultural machinery industry in the past 10 years, basically three years can be considered a small fluctuation cycle.

Since 2022, until 2024, the market has been in a downward trend, with the probability of rebound increasing as market sales hit a bottom.

The huge market inventory formed by emission upgrades in 2022, as well as the inventory caused by market downturns in 2023, will be significantly reduced after digestion in 

2024, and the vast majority of agricultural machinery enterprises can enter the market with light equipment.

At the same time, with the adjustment of the head of the national agricultural machinery regulatory agency, the implementation of the subsidy policy in the new three years and 

the stricter assessment and supervision of the timeliness of subsidy fund realization, it is expected that the driving effect of the subsidy policy will be concentrated in 2025, 

becoming the driving force for the slow rise of the market.

Overall, by 2025, the national policy support for the agricultural machinery industry will not decrease, and industrial progress is expected to continue to accelerate, with an overall 

positive situation.

02 Industry concentration increases

We have been talking about industry reshuffling, and I believe everyone has a deep feeling about it, especially in recent years, the upgrading and transformation of the 

agricultural machinery industry has led to a huge change in brand concentration.

For example, many tractor brands with weaker strength and no product competitiveness have disappeared; The overall market sales of Dazhong Tuo have declined, while the 

sales of brands such as Yituo and Lovol have increased, which is a reflection of the increasing concentration of the industry.

Since 2015, after 8 years of industry adjustment, especially in the context of sustained market position, the survival of the fittest has accelerated.

We also feel that there are two types of enterprises in the agricultural machinery industry that live well. One is the leading enterprise in the industry, which has a good brand effect,

scale strength, and product strength, and can seize market share in competition.

The other is "specialized, special and new" enterprises. Such enterprises are unique in certain fields. No matter their products, technologies, or job adaptability, uniqueness, 

progressiveness, they have won the recognition of users and interested parties, and occupy specific markets. Such enterprises are not wrong.

It is not difficult to speculate that in 2025, it is highly likely that the concentration of the agricultural machinery industry will further increase, and market reshuffling will become 

more normalized.

03 Shortcomings to be filled and 'one big and one small' still crucial

Fundamentally speaking, the domestic supply of agricultural machinery has basically met the needs of mass users. However, it is an undeniable fact that there are many 

shortcomings in the industry. In recent years, the country has advocated for the transformation and upgrading of the "industrial chain" in the industrial sector, the transformation of 

achievements in the "innovation chain", and the improvement of the quality and efficiency of the "capital chain". The agricultural machinery regulatory authorities have also 

focused on filling in the shortcomings and accelerating innovation in the "one big, one small" sector for the development of the agricultural machinery industry.

The shortcomings of the agricultural machinery industry are not only reflected in the import dependence of some high-end, large, and intelligent complete machine products, but 

also in the import dependence of some core components, core control technologies, etc. At the same time, it is also reflected in the overall operational reliability of the products. 

For example, according to statistics, the fault free operation time of domestic harvesting machinery is generally 30-50 hours, far lower than the 100-200 hours in Europe, America,

 and Japan, and the gap can be seen.

It can be boldly predicted that by 2025, the level of the agricultural machinery industry, which focuses on product strength building and technological innovation, will continue to 

accelerate. The research and development of large-scale high-end agricultural machinery products for large-scale operations and the promotion of small-scale special needs 

products for hills and mountains will still be the industry's focus. The filling of industry shortcomings such as reliability improvement, domestic substitution of imported products, 

and research and development of blank agricultural machinery products will accelerate.

Looking at the development patterns of various industries around the world, market fluctuations are a normalized phenomenon. The low operating cycle of the agricultural 

machinery industry is to accumulate strength for improvement and achieve better development.

Riding the wind and breaking the waves, there will always be times when we sail straight to the sea. We believe that with the perseverance and joint efforts of agricultural 

machinery workers, the development prospects of the agricultural machinery industry will become even broader and the future will be even better.

Author: Speaking of agricultural machinery in a straightforward manner

Source: Agricultural Machinery Information Network