작성일자: 2014.4.4

작성자: 키예프 무역관 Aleksei Khranowski(kotrakiev@terabit.net.ua)

 

 

1. Main economic and agricultural machinery market trends

 

 ○ After 2011’s noticeable Ukrainian economic recovery, in 2012 Ukrainian economy again demonstrated slipping and recession. In particular, 2012’s GDP growth comparing to 2011 was 0.2%, although earlier World Bank expected that in 2012 Ukrainian economy will grow for 0.5%. Also, in 2012 the deflation rate was 0.2%. Index of industrial production decreased for 1.8% comparing to 2011. The indexes of metallurgical production decreased for 5.2%, machine-building – for 6%, oil processing – for more than 40%, construction – for 13.8%. Also, in 2012 the production index of Ukrainian agricultural sector decreased for 4.5% comparing to 2011 and the adverse weather conditions and low yield were the main reasons for that. 2012’s trade balance worsened for 8.9% (for US$ 1,634) comparing to 2011, and 2012’s import to Ukraine was US$ 84,658 (for 2.5% more than in 2011) and export – US$ 6,881 (for 0.6% more than in 2011), consequently 2012’s negative trade balance was US$ 14.214 billion. Ukraine’s 2012’s economic recession is explained by the absence of structural governmental reforms, low demand for some types of commodities (e.g. metal) on the world markets and lack of foreign investment.

 

 ○ In 2013 Ukrainian economic recession continued and according to the range of indicators the situation worsened comparing to the previous year. 2013’s GDP growth was 0% and inflation – 0.5%. In 2013 the index of industrial production decreased for 4.7% comparing to 2012. In particular, index of metallurgical industry decreased for 6.3%, machine-building industry decreased for 13.8%, oil processing – for 11.2%, construction – for 14.5%. At the same time some industries have shown growth: pharmaceutical industry grew for 11.6%, ore mining – for 4.6% and agriculture – for 13.7%. The success of Ukrainian agricultural sector in 2013 is explained by the record grain harvest and by the meat, milk and egg production growth. Also, 2013’s trade balance improved for 13.9 % (for US$ 2.196 billion) comparing to 2012 and 2013’s import of commodities was US$ 76.964 billion (for 9.1% less than in 2012) and export – US$ 63.312 billion (for 8% less than in 2012), consequently in 2013 Ukraine still had US$ 13.652 billion negative trade balance. At the end of 2013 Ukrainian economy was seriously damaged by the political crisis, caused by the government’s failure to sign the Association Agreement with EU and massive protests against President and government, President’s escape from Ukraine and new government appointment. As a result, Ukrainian currency has lowered from the level of 8.0 UAH per US$ 1 to 11.0 UAH per US$ 1, Ukrainian government, supporting domestic currency by monetary infusions, lowered Ukrainian international reserves to US$ 15 billion, consequently imposed unpopular economic actions (e.g. tightened the rules of purchasing foreign currency at the interbank market that stroke a blow on Ukrainian importers). The dependence on imported Russian gas (besides actual dependence on Russian gas supplies, since April 2014 its price for Ukraine grows from US$ 268.5 to US$ 480 per 1 thousand m3), huge external debt (U $ 142.5 billion) signifies Ukraine’s pre-default status and stimulates current Ukrainian government conducting tight negotiations with the IMF and other international financial organizations to get a saving credit. Nowadays Ukraine and the IMF reached the agreement on issuing US$ 14-18 billion during 2.5 years, and other international financial organizations promise to issue US $19-20 billion more but it is expected that mainly all these money are going to be provided to Ukraine after May 25, 2014 when extraordinary presidential elections are conducted and Ukraine will get sterling state power. Besides, in March 2014 Ukrainian government imposed the changes to state budget: sequestered range of budget expenditures, reduced the budget income level and dismissed 10% of Ukrainian public officials. In addition, Ukrainian government passed the law on avoiding financial disaster in Ukraine which provides the tight regime of economy, increasing the tax pressure on Ukrainian business and individual incomes and social payments growth freezing. In March 2014 Ukrainian economic was seriously stroked by the Crime’s annexation by Russian army and active military Russian build up near Eastern and Northern Ukrainian border that threats Ukraine by the intervention of Russian army into the continental part of Ukraine. Besides, on March 31 presidential election rally has officially started and it is expected the period until new President’s being elected will be followed by the economic and social problems.

 

 ○ The current Ukrainian government recognizes too complicated economic situation in Ukraine and does not make positive forecast for the rest of 2014. In particular, the government informs that the current Ukrainian budget deficit is US$ 26.2 billion. Also, it forecasts that in 2014 Ukrainian inflation will be 12-14%, 2014’s GDP growth will be -3% (if the IMF and other international financial organizations provide a credit to Ukraine), or -10% (if there will be no international financial help) and in this situation Ukraine will be announced a bankrupt. The international credit rating organizations like S &P and Fitch also note highly problematic status of Ukrainian economy, estimate it as the pre-default and assign negative outlook. In this situation the government and Ukrainian nation start acknowledging that now it is a time of worst expectations and hope for improvement after new President is elected.

 

 ○ Despite the long-drawn Ukrainian economic recession, recently aggravated by the 2013-2014’s massive anti-government protests, the subsequent coup d’etat, Crimea’s annexation by Russia Federation, military tension on Ukrainian-Russian border, war threat at one side and by critical budget deficit, Ukrainian currency lowering and growing external debt at the other side, the agricultural business in Ukraine remains one of the most survivable and promising sectors because of the sufficient resources of fertile Ukrainian soil, mild climate and growing demand for agricultural products on the world markets. Also, Ukrainian government is going to continue agricultural sector development stimulating, agricultural commodities production and export. For instance, in 2013 Ukrainian grain harvest is 58-60 million tons (in 2012 was 46.2 million tons) and in this marketing season is going to export 30 million tons of grain. At the same time Ukraine’s domestic demand for grain 26-27 million tons, that’s why the rest of grain has to be exported. According to Ukrainian Ministry of Agricultural Policy and Food, soon Ukraine will be able to export 35-36 million tons of grain per year and in 2016 the annual grain export will reach 41 million tons.

 

 ○ High profitability of Ukrainian agricultural, especially land cultivation, sector and growing demand for agricultural commodities, especially grain, on the international market pulled numerous foreign and domestic investors and stimulated to pour significant finances into Ukrainian agricultural business, and the process of coming new investors to Ukrainian agricultural market is still going on. In order to achieve highest profit margin the investors conduct the technical modernization of the agricultural machinery fleet to use the soil more effectively and efficiently. As a result, the demand for the agricultural machinery, especially for big and mid size, still exists among Ukrainian big land processing and cultivation companies, at the same time the agricultural machinery growth is negatively influenced by the political crisis and economic recession.

 

 ○ Also, Ukrainian agricultural market has some other specifics. Nowadays in Ukraine it is prohibited to sell or purchase the agricultural land and today’s current owners of agricultural lands are Ukrainian individuals who got the land plots as the shares of the collective public agricultural enterprises when those have been disbanded after crashing planned economy system, or Ukrainian state by itself. Often the individuals cultivate the land by themselves and are growing plants and vegetables for their own nutrition. At the same time many individual land owners and Ukrainian state lease their land to the private domestic and foreign agricultural companies which grow the plant and vegetables for sales. It is permitted to lease agricultural land for the maximal period 49 years and today foreign and private investors are actively enlarging their land bank by leasing new land plots. At the same time big agricultural companies, which lease land plots, often have a problem with the land dispersion among numerous locations that negatively influences the effectiveness of using agricultural machinery (it is often required to deliver the machinery from one region to another spending much time and fuel).

 

 ○ Nowadays the talks in Ukrainian parliament are conducted about possible permit for agricultural land sales but the final decision is not done because the legal model of the agricultural land market is not fully designed and also the agricultural land sales permit is banned by the communists and some other political parties who still have significant number of votes in Ukrainian government. At the same time the big representative of Ukrainian agricultural business are the active lobbyists of the agricultural land sales permit that would give them the possibility to enlarge their land bank and to make it more compact.

 

 ○ But considering the current situation, in Ukraine still there many individual land owners who cultivate small land plots by themselves but at the same time need to cultivate their land more efficiently, that is why they are interested in purchasing modern mini-tractors with high technological performance and low fuel consumption level.

 

 ○ The big and mid-size foreign and some Ukrainian investors usually have enough financial capacity to buy new big-size and mid-size high-class agricultural machinery with the best technical specifications (among US and European big-size and mid-size machinery Ukrainian customers often prefer US because the style of land cultivation in US is more similar to Ukrainian than European – US and Ukraine have large land plots where powerful but rather mono-functional machinery is required, at the same time European land plots are small that’s why in order to make their machinery more profitable it gets more functions and can be used for numerous types of agricultural works). But comparing to big and mid-size investors, which often have sufficient financial resources, Ukrainian individual land owners and small enterprises need smaller machinery and also they do not have enough money for purchasing new high-class agricultural machinery, that’s they prefer purchasing used machinery, or new small-size cheap machinery, produced by Ukrainian, Belarus or Chinese enterprises. The price is one of the most important factors for Ukrainian individual land owners and small agricultural enterprises to buy machinery. Often the individual land owners and small enterprises need to get a bank loan and leasing financing for purchasing even cheap machinery. But nowadays the bank credits and leasing financing often are not appropriate for small enterprises and individual land owners because usually Ukrainian banks offer too high interest rate and provide a loan only for definite tractor brands and models. Besides, now in the time of the political and economic crisis in Ukraine mainly small agricultural enterprises are the subject to the negative influence of the current situation and they suffer more than big investors because of the domestic currency lowering, fuel cost growing and bank crediting system deactivation.

 

 

2. Tractor market trends

 

 ○ One of the most representative sectors of Ukrainian agricultural machinery is tractors. According to various estimations, nowadays more than 50% of Ukrainian tractor market is occupied by foreign machinery (according to some estimations, Ukrainian machinery occupies less than 30% of the market). This is one of the most significant specifics of Ukrainian market of tractors – high dependence on the imported machinery. In Ukraine there several enterprises which produced tractors but they are not able to compete with the foreign manufacturers because Ukrainian tractors are rather outdated and their technological and quality level is lower. These enterprises are Kharkov tractor plant, Dnepropetrovsk tractor plant and Leninskaya Kuznitsa plant in Kyiv. For long years Ukrainian agricultural machinery production industry development was stimulated only by the domestic demand and was related to the situation in Ukrainian agricultural sector. For many years are planned economy failure Ukrainian agricultural sector resumed its development only in 2005 when foreign investors with the significant assets started investing in Ukraine, leasing agricultural land and cultivating it. But during the time before 2005, when Ukrainian agricultural industry has been recessing, Ukrainian tractor manufacturers did not develop new technologies and their machinery was not competitive on Ukrainian market anymore. The foreign tractor manufacturers advantaged this situation, entered Ukrainian market, connected main agricultural enterprises and deprived Ukrainian manufacturers to return to the market. Although foreign tractors are often more expensive than Ukrainian, they are more technological and effective, and even used foreign machinery is more popular than Ukrainian new tractors.

 

 ○ In 2012 and 2013 Ukrainian tractor manufacturers were decreasing their production volumes because the demand exactly for Ukrainian tractors is not high (because they are less quality and technological than foreign) and also Ukrainian manufacturers had the problems with investment into their production and modernization.

 

Tractors production (units)

  Source: State Statistics Committee of Ukraine

 

 ○ In overall, if calculating the imported units of the tractors, in 2012 the import of tractors decreased because of the small harvest and in 2013 the import of the tractors grew, mainly in the segment of tractors, operated by the driver who walks behind (smallest tractors), despite the complicated economic situation. Particularly, the import growth was stimulated by the domestic enterprises which enlarged their land plots, increased agricultural production and needed to invest into the modernization of their agricultural machinery. At the same time the export of Ukrainian tractors decreased because domestic tractor manufacturers decreased their production volume and the demand for Ukrainian tractors abroad was also not active.

 

Tractors export and import (units, HS 870110, 870120, 870130, 870190)

   Source: State Statistics Committee of Ukraine

 

 ○ If calculating import revenue, in 2012 the import volume grew comparing to 2011 and 2013’s import volume decreased a bit comparing to 2012 because still the import value is mainly determined by the big-size machinery which costs much. 2012’s tractor export from Ukraine remained at the approximately same level as in 2011 and in 2013 decreased comparing to 2012 because of low demand for Ukrainian tractors abroad and decreased domestic production.

 

Tractors export and import (US$ million, HS 870110, 870120, 870130, 870190)

 Source: State Statistics Committee of Ukraine

 

 ○ In the segment of mini-tractors, operated by the driver, who walks behind, the import significantly grew in 2013 because of record harvest and also because of complicated economic situation which decreased number of jobs and many Ukrainian people activated their own agricultural land cultivation as the source of income. The number of wheeled tractors for semi-trailers decreased a bit in 2013 because of lower demand, the sales of the caterpillar tractors was still low and did not change in 2012 and 213 significantly (in Ukraine these tractors are not popular because these tractors cannot move by themselves on the automobile roads and it increases the expenses for transportation them by truck that decreases the competitiveness of the enterprise). The sales of other tractors, which include mini-tractors, decreased in 2012 because of the small harvest but grew in 2013 because of record harvest and necessity to modernize the land processing and cultivation by the agricultural enterprises.

 

Tractors import by type (units)

         Source: State Statistics Committee of Ukraine

 

Tractors import by type (US$ million)

          Source: State Statistics Committee of Ukraine

 

 ○ In the segment of wheeled tractors for semi-trailers European machinery is the most popular among Ukrainian customers because of quality, high technological level, multifunctionality and modern design that becomes more important factor for big Ukrainian enterprises when they buy new tractor.

 

Main exporting countries to Ukraine (wheeled tractors for semi-trailers, HS 8701200000)

                Source: State Statistics Committee of Ukraine

 

 ○ In the segment of other tractors, which includes mini-tractors, Chinese machinery is the undisputable leader because of the low price, flexibility in the conditions of payment, delivery and maintenance (e.g. Chinese companies easily agree to supply the tractors with LC payment conditions, have no delays in technical maintenance and supplying necessary parts for repair). Belarus manufacturer also provide low price, high repairability of their machinery (e.g. usual driver can basically repair it in field) and also Ukrainian customers know Belarus as the quality manufacturer. Japanese and US companies supply quality machinery with high technological level and famous brands. In particular, Japanese manufacturers are strong in the segment of mini-tractors and US manufacturers are more specialized in the mid-size and big-size machinery production.

 

Main exporting countries to Ukraine (other tractors, HS 8701900000)

               Source: State Statistics Committee of Ukraine

 

 ○ The leading exporter of the mini-tractors (whose driver walks behind) is China – 128471 units in 2013 because of the cheap price and beneficial payment and delivery conditions. US (35 units) and Russia Federation (12 units) are the leading suppliers of the caterpillar tractors to Ukraine in 2013 although the segment of the caterpillar tractors in Ukraine is rather weak now.

 

 ○ Ukraine imported tractors also from Korea but only in 2012 and 2013 and they were mainly mini-tractors. The import volume in 2013 decreased comparing to 2012 for 120 units.

 

Tractors imports from Korea to Ukraine (units, US$ thousand, HS 870190)

 

 ○ In overall, Ukrainian tractor market showed slow growth in the units and approximately same level (some decreasing) in money in 2013 because of the activation of the land cultivation, demand for Ukrainian agricultural products, especially grain, on the world markets. In particular, the sales of the mini-tractors, operated by the driver who walks behind, mini-tractors, operated by the driver inside and mid-size tractors grew.

 

Tractor market size (units, HS 870110, 870120, 870130, 870190)

                Source: State Statistics Committee of Ukraine

 

 ○ Considering all this, it is possible to determine some main tractor market trends specifics:

  - In the overall the demand for the tractors on Ukrainian market renewed its growth after 2010 and Ukrainian market still has capacity because of Ukraine’s intention to activate the agricultural sector development and to increase the grain export, at the same time during the recent years the market was negatively influenced by the political crisis and economic recession, that’s why the tractor sales did not reach its best expected level.

  - Ukraine is dependent on the supplies of the foreign tractors because they are more quality and technological that positively influences the land cultivation effectiveness and increases the competitiveness of the enterprise. The import of the tractors grew in 2013 comparing to 2012 and the demand for foreign tractors is expected to be still high in the next years.

  - Ukrainian individual land owners and small-size agricultural enterprises lack finances for purchasing new high-class tractors, produced by US or European companies, that’s why they often buy used US or European machinery which is significantly cheaper than new but still quality. Also, many individual land owners and small-size agricultural enterprises purchase cheap new machinery, produced by Belarus, Ukrainian or Chinese companies

  - Ukrainian tractor manufacturers’ sales are still weak on Ukrainian market, their machinery is technologically outdated and they cannot compete with US, European, Belarus and Chinese tractors. That’s why some Ukrainian tractor manufacturers are looking for the possibility of joint tractor production on the territory of Ukraine with the foreign (e.g. Chinese) companies which can supply parts and components to Ukraine. As a result, the import of the foreign tractors to Ukraine grew during recent years and foreign manufacturers became most influential market operators.

  - Despite its significant capacity, Ukrainian tractor market is negatively influenced by the current political crisis, Ukrainian hryvnia devaluation, budget deficit and problems in the energy sector. That’s why in 2014 the situation at the tractor market is expected to worsen comparing to 2013.

 

SWOT analysis of Ukrainian tractor market for foreign tractor supplier

 

 

3. Competition trends

 

 ○ Nowadays the foreign tractors are more popular on Ukrainian market than domestic machinery that cause the preponderance of the foreign tractor brands in Ukraine over domestic and determine the overall sales structure.

 

Popularity of agricultural machinery brands in Ukraine (2012, %)

        Source: State Statistics Committee of Ukraine

 

 ○ The undisputable leaders at Ukrainian tractors market are US and European manufacturers – John Deere (US), AGCO (Challenger, Fendt, Massey Fergusson brands, US), CNH (Case and New Holland brands, Netherlands), Class (Germany), Deutz-Fahr (Deutz-Fahr, Lamborgini brands, Germany), MTZ (Belarus). Also, in the segment of small-size and mid-size tractors numerous Japanese (Mitsubishi, Kubota, Iseki, Hinomoto, Yanmar, Sibaura), Korean (Kioti, Branson), Chinese (Dong Feng, Foton, Xingtai, FengShou, XCMG, Luzhong, Jinma), Ukrainian (Kharkov tractor plant, Dnepropetrovsk tractor plant, Leninskaya Kuznitsa plant) are also represented. The big manufacturers with the famous brands usually have the representative offices and several distributors on the territory of Ukraine, at the same time smaller manufacturer have a distributor or few distributors only.

 

Main tractor market operators

      Source: market operators

 

 ○ On Ukrainian market all ranges of tractor capacities are represented – from 20 to more than 390 KP. Each segment has its own potential customers (e.g. 20-120 HP – individual land owners, 120-160 HP – mainly small enterprises, 160-260 HP – mid-size enterprises, 260-390 and more – big-size enterprises) and own specifics. There are much different estimations about the shares of each segment in the overall Ukrainian market but the one thing can be supposed is that the tractors of small capacity segment (20-120, 120-160 HP) are the sales leaders when calculating sold units of tractors, and the tractors from the big capacity segment (260-390 and more HP) are the sales leaders when calculating revenue.

 

 ○ In 2013 Ukrainian tractor market segment 20-120 HP has been activated a bit and has shown some growth. It is one of the most focused-on-price segments because the main customers in this segment are the individual land owners whose revenue are too small and they have the lowest financing ability for purchasing new tractors. That’s why the price is one of the most important factors when the customer is looking for the new tractor in this segment. Naturally, in 20-120 HP segment mainly the manufacturers of rather cheap tractors are popular among the customers (e.g. Belarus, Chinese, Ukrainian manufacturers) but at the same time some brands with the higher price and quality level (e.g. US, Japanese, Korean) are also demanded at the market by the customers who have more finances and want to buy more technological and quality machinery. One of the most notable features of Ukrainian tractor market is still high popularity of Belarus tractors, produced by Minsk tractor plant (MTZ). Ukrainian customers still like MTZ tractors because they are cheap, produced by CIS country (psychologically, Ukrainian customers recognize Belarus tractors as domestic) and high repairability (it is easy to find the necessary part at Ukrainian market and its cost is rather low). Also, Ukrainian customers suppose that Belarus tractors have simple technical design and it is easy to operate and maintain them. MTZ offers the tractors in the range of 35 and 120 HP (but also it may offer the tractors with the capacity till 355 HP for other market segments). The most popular MTZ model on Ukrainian market is MTZ-80 which is best-seller for many years.

 

 ○ One of the most powerful competitors at Ukrainian market of tractors, in particular mini-tractors, is Chinese machinery which occupies more than 50% of 20-120 HP segment. Chinese brand Dong Feng, which is second most popular mini-tractor manufacturer in Ukraine, offers low-technological but cheap tractors and they are demanded mainly by small agricultural entrepreneurs which have small financial capacity. Dong Feng supplies the mini-tractors with the capacity in the range of 24 and 40 HP. The popularity of Dong Feng tractors gives the possibility to this brand to occupy the second place at Ukrainian market.

 

 ○ Besides, the cheap price, parts and high repairability have brought the popularity among Ukrainian customers also among few more Chinese brands – Xingtai, Foton, FengShou, XCMG, Luzhong. The popularity of these brands grew during several previous years because Ukrainian distributors of Chinese distributors improved their service, opened additional technical maintenance centres, provided supplying of the necessary parts, and at the same time during this time Chinese manufacturers have considered the previous shortcoming of their tractors and improved the tractors a bit that positively influenced their performance.

 

 ○ The domestic tractors at Ukrainian market are represented by Kharkov tractor plant, Dnepropetrovsk tractor plant and Leninskaya Kuznitsa plant, but it is worth to mention that some the tractors, produced by these enterprises, consist of Chinese parts (20% and more). Kharkov tractor plant offers one tractor model in the mini-tractors segment (27 HP). Dnepropetrovsk tractor plant offers few tractor models with the capacity 60 and 80 HP. The tractors, produced by Kharkov tractor plant, Dnepropetovsk tractor plant and Leninskaya Kuznitsa plant, are purchased by Ukrainian customers mainly because of the low price, simple delivery and high repairability. But at the same time the customers note that the quality of Ukrainian tractors is still rather low and the fuel consumption level is too high, that’s why many customers prefer purchasing imported tractors. Besides, Ukrainian tractor production industry is not actively supported by Ukrainian government and the customers do not get an advantage to buy Ukrainian machinery but they might do it if Ukrainian government stimulated Ukrainian banks to issue cheap credits for Ukrainian tractors purchasing or provided tax preferences to those agricultural enterprises which use domestic machinery. Despite this, Ukrainian tractors manufacturers hope that they will be able to increase their sales in the next years. In particular, Kharkov tractor plant is going to increase the tractor production volume till 4 thousand tractors per year according to its 5-years manufacturing extension strategy. According to Kharkov tractor plant, their sales growth will be stimulated by Ukrainian agricultural business activation and the technological improvement of the tractors, produced by the plant (they are going to modernize production equipment, design new tractor’s transmission, modern design, improve working conditions for tractor’s driver etc.). Among all Ukrainian tractor manufacturers, in 2012 Kharkov tractor plant produced 1653 tractors and in 2013 – 1700. More than 80% of their tractors are exported, in particular, 50% - to Russia Federation.

 

 ○ Higher price range of the mini-tractors is mainly represented by the models of Kioti and Branson (Korea), Mitsubishi, Kubota, Iseki, Hinomoto, Yanmar, Sibaura, Suzue (Japan). The sales of these brands are smaller than Chinese tractors because less land owners and agricultural enterprises are able to buy such tractors which cost more than Chinese. At the same time Korean and Japanese brands consist of more quality parts and materials, the level of production is higher, they have better technical performance and have more technical options. Also, when Ukrainian customers buy Korean or Japanese tractors, they consider that Korean and Japanese engineers have precious experience in creating the agricultural machinery for small land area cultivation, and this experience is useful for Ukrainian individual land owners and small enterprises which cultivate small area (because Ukrainian, Belarus and US manufacturers are more specialized in creation the machinery for big land area). One more advantage of Korean and Japanese mini-tractors is the rather low fuel consumption level that is important for Ukraine where the fuel is mainly imported from Russia Federation and fuel price is growing because of Ukrainian currency lowering.

 

 ○ Besides, the existing mini-tractors brands on Ukrainian market, in 2014 Indian tractor brand Solis is going to enter the market. Solis will offer the mini-tractors with the capacity range 20-90 HP (exactly, the following models and capacities will be available – Solis 20, 35, 45, 50, 60, 75, 90). Solis will be the close competitor to Belarus MTZ brand because of approximately same price and quality level. Also, the manufacturer has designed wide range of attachments for the tractors (e.g. cultivators, harrows, plows, seals) and it can become one more reason for Ukrainian customers to buy Solis tractors.

 

 ○ The sales success in the mini-tractors segment highly depends on the price and some enterprises consider the opportunities of launching new mini-tractor brand production on the territory of Ukraine. It gives the possibility to avoid paying the customs duty during importing ready mini-tractors and transportation fee to Ukraine. In particular, Ukrainian distributor of the agricultural machinery Amako already imports and sells mini-tractors but also is going to launch own production at the facilities in Ukraine using some Chinese parts.

 

 ○ One of the popular segments at Ukrainian tractor market is 120-160 HP. The undisputed leader in this segment is Belarus brand MTZ. It offers rather low price and the quality, approbated during long time of exploitation. Also, MTZ provides sufficient supply of the parts to Ukrainian market and MTZ tractors have high repairability that is especially liked by Ukrainian individual land owners and small agricultural enterprises that prefer to repair the tractors by themselves. It is hard for other foreign manufacturers to enter Ukrainian 120-160 HP segment because US and European manufacturers are not able to provide lower or even same price as MTZ. At the same time John Deer’s models 6130D and 6630, Case IH’s Puma 155 and Deutz-Fahr’s M620B can be considered as the particular competitors to MTZ in this segment of Ukrainian market.

 

 ○ The tractors of 160-260 HP range are popular among Ukrainian mid-size and some big-size agricultural enterprises. The sales leaders in this segment are John Deere 6930, T7060, 7930, 7830, Case IH MX255, MX260, Puma 210, Claas Axion 850 CIS.

 

 ○ The tractors of 260-390 HP range are popular among Ukrainian big agricultural enterprises, and the leaders of this segment are 5 brands - CNH, John Deere, Agco, Class and Deutz-Fahr, that fully occupied the segment and increased 2013’s sales in Ukraine for 42% comparing to 2012 - from 1012 units in 2012 to 1440 units in 2013.

 

260-390 HP tractors sales (units, 2013)

                       Source: APK-Inform

 

        Source: APK-Inform

 

 ○ The 260-390 HP range is becoming popular among Ukrainian customers because more agricultural enterprises prefer using the tractors of this segment for exploitation the widely capturing soil processing and sowing agricultural attachments and for transportation of the crop to the storage or to the processing enterprise that makes the production cost cheaper, increases the competitiveness of the enterprise in Ukraine and the competitiveness of the enterprise’s production on the world markets. Also, Ukrainian tractor manufacturers are not represented in this segment and foreign manufacturers have the possibility for competition in same conditions. In Ukraine 260-390 HP segment is indicative and its status can be considered as the index of Ukrainian tractor market development.

 

 ○ The tractors with the capacity more than 390 HP are less popular among Ukrainian customers than less powerful tractors and this segment is represented CNH and John Deere brands.

 

 ○ Although Ukrainian tractor market has rather big potential because of land processing and cultivation active facilitating and growing demand for Ukrainian agricultural products, especially grain, on the world markets, main Ukrainian tractor operators expect that the situation at the market in 2014 will be too complicated. The problems are political and military tension between Ukraine and Russia Federation, significant Ukrainian hryvnia devaluation, Ukrainian budget deficit and other economic factors. Also, in 2013 Ukrainian tractors imported many new tractors but failed to sell them during February – March 2014 because of the political crisis and economic recession, and they need to sell these tractors in 2014-2015, that’s why they may decrease tractors import volume in 2014. At the same Ukrainian tractor distributors and customers hope that new President, elected after May 25, will be able to get sufficient loans from the international financial organizations and conduct necessary state reforms, in particular in the financial sectors, in order to support and stimulate the development of Ukrainian agricultural business.

 

 

Source: State Statistics Committee, online analytical sources - APK-Inform, UkrAgroConsult, Expert Agro, Inpress, Latifundist, ProAgro, Agropravda