Interview with Mel McGlinchey, Vice President at Kubota
Agritechnica 2015 was a major event for Kubota. The Japanese company presented its latest tractor range and several other new products with the aim of strengthening the position of Kubota on the European agricultural machinery market. Agriaffaires had the pleasure of meeting Mel McGlinchey, Vice President of Kubota Germany, to talk about Kubota’s business activities and their commercial strategy in the agricultural sector.
What trends are influencing the agricultural machinery market in Germany?
Between 2012 and 2014, the agricultural equipment market experienced a great boom in Germany. Due to good crop performances and favorable prices, the demand from farmers was high and they were willing to invest in agricultural machinery. But the agricultural market is subject to cycles, which means that peaks are often followed by troughs. In 2015, for instance, we have experienced a downturn due to the developments observed in the cereal and milk markets, with the end of quotas in Germany at the beginning of the year. Grain prices are down compared to last year and they are now coming back to a level that I would call average. This has had an impact on the agricultural machinery market, mainly the tractor section, for which the demand has fallen. It was expected, so we handle the situation exactly as farmers do and we try to make the best of it. We still do not have all the forecasts for next year, but it is possible that the market for agricultural machinery will drop some more points.
Does this situation have an impact on the size or type of machinery in demand?
At Kubota, we offer a tractor range that goes up to 140 horsepower. On one side, we have our communal tractor range that goes up to 50 horsepower. Unlike agricultural tractors, the communal tractor market has risen this year as the German economy is doing quite well. Kubota is relatively well positioned on this market segment. We are very pleased that our volumes have gone up this year. We launched several models in 2015 that were very well received by our customers.
Regarding agricultural tractors (50-140 hp), our market has fallen for the reasons I have just explained. But thanks to the efforts of our dealers and the promotion of our brand, we have reached an increasing number of German farmers who are planning to invest in Kubota machines. The result is that our market share in the segment of tractors between 50 and 140 horsepower has also risen in Germany in 2015.
Does the Kubota company encounter any particular difficulties to strengthen its presence in Europe?
Kubota has been present in Europe for several decades. Our business in Europe is based on four pillars: first, the communal market; and secondly, the building/public works market where we sell a range of wheel loaders, mini excavators etc. We have been operating in both sectors for a long time, our brand and the quality of our products are well known and our distribution network is very strong and motivated.
Industrial motors, the third pillar of our business, remains a strategic and important asset for Kubota. This segment has also experienced a good growth in Europe this year, mainly thanks to a favorable evolution of prices.
Our fourth activity in the agricultural sector. In this field, our brand is less known and we still have a lot of work to do to develop our brand and communicate our values to professional farmers. I would say this is a long process: we must above all invest in the expansion of the product portfolio we offer to farmers. We started in 2012 with our investment in Kverneland and continued in 2015 with the release of the M7001 series, the opening of the new factory in France etc. It’s a step by step approach.
In addition, we try to support our dealers so that they can grow in this very important and mature sector. Although we already have a well-developed dealer network, there still remains uncovered areas. We want to cover these zones in the near future, either by expanding the area of responsibility of our existing dealers or by recruiting new dealers. We are following several axes to support our commitment to growth in the agricultural sector.
What role does the second hand market play in your business strategy?
Used machinery represents a very important business for all dealers regardless of the brand they represent. Our dealers have a lot of experience in selling Kubota products, especially the 0-140 hp segment. Our used equipment is in demand and sells well but expanding our range also impacts the prices our dealers will have to deal with. The M7001 products, for example, are more expensive than our other new or used tractors. We need to help our dealers to resell these products efficiently and profitably.
What innovations is Kubota presenting at Agritechnica?
Kubota is launching several new products this year and we are very pleased to share them with you at Agritechnica. Our major novelty is of course the M7001. This tractor range includes the 130, 150 and 170 hp models. The M7001 is produced in our new factory in the city of Bierne, in northern France, where our production line has just started. The factory was inaugurated by our President, Mr. Kimata last September.
Beyond the M7, there are two other major developments. The second novelty concerns our tool range. We are currently entering what we call “Phase 3” of the introduction of Kubota tools. Phase 1 concerned hay tools and during phase 2, we introduced soil cultivation implement, such as seeders and spreaders. Now, at Agritechnica, we celebrate the world premiere of our new plows and sprayers that will be available for sale in 2016 in France and Germany. Our investment with Kverneland has allowed us to expand our range, meet the needs of many segments in the agricultural market and increase Kubota’s visibility amongst farmers.
We are not only launching new products but also new services. The third and final big news is the launch of “Kubota Finance”. We have developed a partnership with the BNP Paribas bank in five very important countries in the agricultural world: England, France, Germany, Spain and Italy. Other countries will follow in a second phase. We are very pleased to announce this new partnership and to launch it in Germany here at Agritechnica. We will focus on financial solutions for our end customers, farmers, by offering them financing solutions at very competitive rates that will allow them to have a better return on investment. Secondly, other options are possible, whether they concern financing the purchase of used equipment or facilitating financial management for dealers.