Vietnam Agricultural Machinery Market Report – 2020 : Ken Research

• Country Overview - GDP, GDP Per Capita And Population Demographics Of Vietnam

• Vietnam faces a constant threat from storms and droughts which has plagued the agricultural industry of the country several times over the past few years. However, growing demand for country’s agricultural output, surging manufacturing and service sector have helped the Gross Domestic Product (GDP) of the country rise from USD ~ billion in 2010 to USD to USD ~ billion in 2015. The 2025 projection for GDP of Vietnam is estimated to be USD ~ billion, while the GDP (PPP) of the country is expected to reach USD ~ billion. In 2015, the percentage of rural population declined to ~%, amounting to ~ million persons. On the other hand, the percentage of urban population increased to ~% of the total population, accounting to ~ million individuals. The higher wage rate and infrastructure facilities attracted individuals from rural to urban areas.

As is true in every newly industrializing economy, the economy of Vietnam is mixed. While Vietnam is widely perceived as an economically developing country led by agricultural exports, the majority of the country’s income is driven by the manufacturing and service sector. In 2010, the agriculture sector contributed ~% to overall GDP while the manufacturing and service sector contributed ~% and ~% respectively, to the overall GDP of the country. In 2015, the contribution of the agriculture sector declined to ~% of GDP, while the manufacturing and service sector contributed ~% and ~% respectively, to the overall GDP. The future estimates indicate the contribution of the agriculture sector to further decline in 2016 to ~% and by 2020; the sector is estimated to contribute ~% to overall GDP. The GDP Per Capita (Nominal) increased from USD ~ in 2010 to USD ~ in 2013 and then decreased to USD ~ in 2015.

• Agricultural Overview - Agricultural Practices, Farm Structure And Changing Cropping Pattern

Agriculture land is typically the land devoted to rearing of livestock and the production of crops. Arable land is the land that is capable of being ploughed and used to grow crops. The total agriculture land in Vietnam increased from ~ thousand square kilometers in 2010 to ~ thousand square kilometers in 2015. Alternatively, the arable land in Vietnam increased from ~ thousand square kilometers in 2010 to ~ thousand square kilometers in 2015. Vietnam‘s law defines land as either private or public. Private land is owned by individuals, groups, or entities. The balance is public land, which includes, land used by the state, land open to the public, land identified for allocation under land reform plans and forestland. The total number of farm holdings in Vietnam totaled to ~ million with an area of ~ million hectares in 2015. The area in Vietnam under irrigation covers ~% of the overall agricultural land, amounting to ~ million hectares.

Average temperatures in Vietnam are rising gradually which could have an effect on the cropping cycle of the country. Over the past 50 years, the average temperature of Vietnam has inclined by 0.5 degree Celsius to 0.7 degree Celsius. Rising temperatures have increased the crop growth rate and thereby have shortened plant’s growth cycle. A 1 degree Celsius increase in the temperature could shorten the growth cycle by 5 to 8 days for rice, or 3 to 5 days for potatoes and soybean. The harvested area for rice increased from ~ million hectares in 2010 to ~ million hectares in 2015. Maize is the second most important food crop in Vietnam after rice. It is considered as a substitute of rice in case of shortage. Therefore, its cultivation is essential for ensuring food security in Vietnam. This has resulted in a continual rise in area under maize cultivation over the period 2011-2015. There were ~ farms in Vietnam in 2014. Mekong River Delta, Red River Delta and Central highlands are the major farming regions of the country. These three regions account for ~% of the total number of farms in Vietnam as of 2014. Rate of mechanization in the country has enhanced from ~% in 2013 to ~% in 2015.

• How Has The Government Policy Impacted The Agricultural Machinery Market In Vietnam?

The government has made several changes to the previous version of the land Policy in Vietnam. The revised policy which was released in 2013 consists of several changes which have impacted the farm holding structure in Vietnam in both positively and negatively. There are many policies such as Policy on agriculture Land Tenure, policy on Agriculture Land Prices, Policy on Agricultural Land Tax have been projected to enhance he average fm holding size in t eh country over the coming years. Vietnam has signed Free Trade Agreements (FTA’s) with many countries which have resulted in the removal of tariff and quotas on various imports. Those countries which have not signed Free Trade Agreements (FTA’s) with Vietnam have to follow the tariff lines for products imported to the country. This scenario has greatly benefitted the importers of agricultural machinery n the country.

Government of Vietnam has provided a supporting hand to develop agricultural machinery production in the country. Still, there is a significant lack of Government financial support to local manufacturers of agricultural machinery in Vietnam. Foreign machine import has not been controlled by the government and leads to unfair competition for domestic manufactures. Local manufacturers face difficulties with capital, technology and planning as they receive very minimal financial support from the government. In 2014, the Agribank piloted credit program that encouraged customers to apply sciences and high technology in agricultural production. Agribank offers maximum annual interest rates of ~% for short-term loans, ~% for medium terms, and ~% for long terms. There are some certain certifications in Vietnam which the manufacturers use to add value to their products. However these certifications are voluntary not and have not been mandated by the Government of Vietnam. Most companies usually obtain ISO 9001 certificate

There are a number of agricultural subsidies which the government provides to Vietnamese. For instance, the central budget supports the costs incurred by farmers for purchasing inputs for agricultural purposes: ~% of the input cost for mountainous provinces and Central Highlands ~% for other provinces and cities There are many other subsidies available to farmers in Vietnam. Standard sales tax (tax on goods and services) in Vietnam is ~ for sale in domestic market. However, for agricultural machinery and products it ranges from ~% to ~%. Certain agricultural products such as products from farming which are unprocessed, irrigation services procured by farmers and others have been exempted from sales tax. Agricultural machinery and equipment including tractors, transplanters, seeders, threshers, harvests, combined harvester, and pesticide sprayers are subject to a sales tax of ~%. Corporate tax in Vietnam has been reduced from ~% in 2014 to ~% in 2016.There is ~% Octroi tax in Vietnam.

• How Is Vietnam Agriculturl Machinery Market Positioned?The revenues from the overall agriculture equipments market increased from USD ~

million in 2010 to USD ~ million in 2015, accounting for a CAGR of ~% during the same period. The contribution by the tractor market to the overall market stood at ~% in 2015. Harvesters and Rice Transplanters contributed ~% and ~% respectively, to the overall revenues of the agriculture equipment market. In addition to this, the tractor implements market contributed approximately ~% to the overall agriculture equipment market. The revenue from the tractor market in Vietnam increased from USD ~ million in 2010 to USD ~ million in 2015, achieving a CAGR of ~% during the same period. Tractors have been segmented on the basis of power and those that range from 14.5 to 47 hp accounted for ~% of total tractor sales volume. Tractors below 14.5 hp, also known as power tillers, contributed ~% to overall tractor sales.

The market revenue for Rice Transplanters increased from USD ~ million in 2010 to USD ~ million in 2015, accounting for a CAGR of ~% from 2010-2015. The market for rice transplanters has been segmented on the basis of power. Rice transplanters below 10 hp include 4 row and 6 row walking type and contributed around ~ to overall sales. Transplanters above 10hp include 6 row and 8 row riding type, contributed ~% to overall sales. The market revenue from combine harvesters increased from USD ~ million in 2010 to USD ~ million in 2015, accounting for a CAGR of ~% during the same period. The market for combine harvesters has been segmented on the basis of power. Combine harvesters of 70 hp are most preferred by the farmers of Vietnam and hence this segment accounted for ~% of total sales of combine harvesters. Harvesters of ~ hp and above contributed ~% and ~% respectively to the overall sales of combine harvesters in Vietnam.

The revenues from the tractor implement market augmented from USD ~ million in 2010 to USD ~ million in 2015, accounting for a CAGR of ~% during the same period. Majority of tractor sales are accompanied with tractor implements. Therefore, the growth of the implements market is highly dependent on the sale of tractors in Vietnam. The market for implements in Vietnam is considerably more fragmented compared to others. The market for tractor implements has been segmented on the basis of major products. Rotavators contributed around ~% to overall sales of tractor implements. Disc ploughs and harrows contributed ~% and ~% respectively, to overall tractor implements sales.

Chinese machinery and parts has considerable presence in Vietnamese agricultural machinery market. However, this presence is majorly limited to second hand/used agricultural machinery (especially used 2 wheel and 4 wheel tractors) and raw materials. Dominant players in the market such as Kubota, VEAM, Vikyno and Vinappro and Phan Tan Agricultural Co. Ltd. mainly use China for raw materials requirements. Share of china in sales of used agricultural machinery in Vietnam is ~% in 2015. Changes in labor force, improving credit environment and government support to enhance agricultural mechanization in Vietnam has supported the growth of the agricultural machinery market over the period 2010-2015. With respect to sales of agricultural tractors, Japanese manufacturer Kubota had the market share of ~%, followed by Yanmar with ~% and VEAM with ~% in 2015.

In the combine harvester market, Kubota had a share of ~% of overall sales, Yanmar accounted for ~% of total combine harvester sales, while domestic manufacturer Phan Tan Agricultural Machinery Co Ltd., contributed ~% to overall sales of combine harvesters. With respect to Rice Transplanters, Kubota had the highest share in overall sales accounting to ~%. On the other hand, Yanmar accounted for ~% share in overall sales of rice transplanters. Given the target audience, it is essential manufacturers use efficient channel strategies to create awareness and boost the sale of agricultural machinery. It has been estimated that nearly ~% sales of new tractors is accompanied with the purchase of tractor implements. Thus, it is vital that manufactures have an extensive dealer network and proficient sales men. The manufacturers collaborate with famous entities and hold exhibitions, advertise and incentivize farmers to increase the procurement of agricultural machinery.

The warranty period varies for different agricultural equipments. The warranty period for tractors usually ranges from ~ to ~ hours or ~ year. Combine harvesters have a warranty period of ~ year or ~ hours. Transplanters have a warranty period ranging from ~ to ~ hours or ~ year. Tractor implements usually have a warranty period not more than ~ months. Yanmar has initially put major focus on the South. Kubota is the most dominant player in the agricultural machinery market of Vietnam as of 2015. Their business model in a nutshell can be simply described as ‘manufacture and sell through a large dealer network’. Yanmar’s business model in Vietnam is considerably different from Kubota. Yanmar does not have a manufacturing facility in Vietnam and therefore follows an ‘import oriented business model.’ For agricultural machinery, VEAM follows an import oriented business model. VEAM is in collaboration with Iseki of Japan, which acts as the provider of all its agricultural products. VEAM imports CKD tractors, rice transplanters and combine harvesters from Iseki manufacturing plants in Japan. These tractors, rice transplanters and combine harvesters are then assembled in the VEAM’s manufacturing facilities in Vietnam.

Channel strategies for manufacturers are majorly designed for agricultural machinery such as tractors. Implements are complimentary items which are promoted by the manufacturers and the dealers when a tractor is being purchased as majority of people in Vietnam buy implements along with the tractors itself. Proximity of dealers to the farmers, road shows, tie us with local agri banks, salesmen are some of the strategies used by the OEM’s in Vietnam to reach out to the farmers. Market for agricultural machinery in Vietnam has grown at a considerable pace over the period 2010-2014. However, the growth was slightly constrained in the year 2015 when Vietnam was hit by one of the worst droughts the country has experienced. This is likely to effect the growth in the year 2016 as well. Market has been anticipated to pick up from 2017, and growth significantly over the period 2017-2020. Market for agricultural machinery in Vietnam has been projected to reach USD ~ million in 2020, posting a CAGR of ~% over the period 2016-2020.

Market for agricultural machinery in Vietnam has grown at a considerable pace over the period 2010-2014. However, the growth was slightly constrained in the year 2015 when Vietnam was hit by one of the worst droughts the country has experienced. This is likely to effect the growth in the year 2016 as well. Market has been anticipated to pick up from 2017, and growth significantly over the period 2017-2020. Market for agricultural machinery in Vietnam has been projected to reach USD ~ million in 2020, posting a CAGR of ~% over the period 2016-2020. Revenue from sales has been projected to amount to USD ~ million in 2018. Further growth has been anticipated supported by increasing sales of major players and entry of new players. The revenues of the overall market will amount to USD ~ million 2020. It is essential to understand the decision making process of farmers in the procurement of agricultural equipments. Region and land holding size are the primary factors that determine the type of agricultural machines a farmer would like to purchase.

There are several factors considered by farmers in before buying new agricultural machines in Vietnam. Average income of a rice farmer in Vietnam varies depending on the size of farm. Other sources such as aquatic and fisheries and other non farming sources earn farmers USD ~ on an average in Vietnam as of 2015. Average farm size in Vietnam is low as compared to countries such as India, Thailand and Japan. As of 2015, the average size of a farm in the county is ~ hectares which has increased from ~ hectares in 2005. Size of farms in the north is much larger compared to farms in the south.

• Source: https://www.kenresearch.com/agriculture-and-animal-care/agriculture-equipment/vietnam-farm-equipment-implements-market/27110-104.html

• Contact: Ken ResearchAnkur Gupta, Head Marketing & CommunicationsAnkur@kenresearch.com+91-9015378249

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