Looking back and Expecting the 2016 Self-propelled Wheel Type Grain Combine Harvester Market

The harvester market with the most dramatic changes in 2016 certainly is the self-propelled wheel type grain combine harvester market, because the self-propelled wheel type grain combine harvester market experiences the bluff type avalanche during the period from January to April, but its year-on-year decrease is little now; it experiences the high inventory, shrinking market and then experiences the situation that the demand exceeds supply in the later period of the second quarter; and it experiences the unprecedented development course “from the slave to the general”. The most dramatic change is accidental or inevitable? How should we explain the drastic fluctuations of the market?

The market declines slightly and the monthly performance falls before rises 

Since beginning of 2016, China’s self-propelled wheel type grain combine harvester market has declined slightly, but the small decline can be receptible. According to the market survey, by the end of August, China’s accumulated sales volume of various models of self-propelled wheel type grain combine harvesters has been 47.3 thousand sets, the year-on-year decline of which is small and is 4.15%.

By looking back the monthly trend of the market from July, 2015 to August, 2016, it is not difficult to find that the self-propelled wheel type grain combine harvesters continuously fluctuates at the low level for ten months from July, 2015 to April, 2016 on the monthly year-on-year basis. During these ten months, except that the different-degree increase occurs in August and December, 2015 on the year-on-year basis, other months show the large decrease. Up to May, 2016, the market demand begins to increase and the year-on-year increase is large and is 183.2%, which opens the door of increase. Then, larger increase also occurs in June, July and August. The monthly link relative ratio shows a trend of ups and downs. But during the period from April, 2016 to July, 2016, the continuous decrease occurs and the increase only begins to occur in August.

同比：On year-on-year basis

环比Compared with last stage

In recent years, the trend of the market of the self-propelled wheel type grain combine harvesters has broken up the above ten-year rule that the period of decrease cannot last for two years. In the past more than ten years, the trend generally is that the decrease lasts for one year and then the retaliatory growth lasts for two even three years soon afterwards. While, since 2013, the decrease occurs continuously in 2014 and 2015 and the decrease range in 2014 and 2015 respectively is 4.59% and 8.2%., which obviously reflects the insufficient market driving force. Of course, there are various forming reasons, but following factors are the most crucial.

Firstly, the rigid demand is insufficient. It is common knowledge that in China, the mechanical harvest level of wheat has already exceeded 80% in 2008 and reached 83.84%, thus the wheat harvest mechanization is achieved basically and the mechanical harvest level of wheat even reached 95.23% in 2015, which determines that the impetus of the self-propelled wheel type grain combine harvester market is not from the rigid demand, but is from the upgrade demand in recent years.

Secondly, it is the adjustment of the demand structure. The large-sized machinery become the consumption mainstream in recent years, which directly lowers the market demand quantity of the self-propelled wheel type grain combine harvesters.

Thirdly, the changing-over between the National II standard and the National III standard comes. On December 1, 2016, market of the wheel type grain combine harvester matched with the Nationals II standard engine will be eliminated from the catalog of allowance for agricultural machinery. While in the process of carrying out the allowance, the market allowance deficiency occurs in some areas where the idea of living beyond means is pursued for a long time, in addition, the allowance fund for one machine decreases by 10% in 2016, thus the increase of the cost for purchasing machine is caused directly and the strong wait-and-see attitude forms in the terminal market, and thereby the market opening is terrible in 2016.

Fourthly, the purchasing power decreases. In 2015, price of three main grain crops decreases together. The low price of grains hurts the farmers. Many consumers’ purchasing power is affected significantly and thereby some market demands are restricted.

Fifthly, the marginal benefit of investment decreases. Most users of purchasing the machinery are the investment demand. In recent years, with the constant increase and gradual saturation of the market inventory of the wheel type grain combine harvesters, the mechanical harvest price competition of the cross-area operation is increasingly fierce, which dampens the consumers’ initiative of purchasing machinery, especially the potential consumers.

Sixthly, the purchasing time is put off. Affected by these factors including the allowance for the agricultural machinery and the huge inventory of enterprises etc., the consumers wait for the suitable time for getting off their hands all the time in 2016 and they begin to purchase the machinery until coming of the wheat harvest in June, which directly results in the demand feature, namely, the demand falls before rises.

The concentration degree is stable and “increase in 7 areas and decrease in 5 areas” occurs for the mainstream areas.

In China, the wheat planting area determines that the self-propelled wheel type grain combine harvester markets are mainly located in the Huang-Huai-Hai area. By means of analysis on the first 10 mainstream area markets demand, by the end of August, the accumulated sales volume of various kinds of machinery is 45.6 thousand sets, the year-on-year decrease of which is 4.11%; its proportion is 96.3%, which is basically equal to that of the same period in 2015.

From the performance of market in various areas, the year-on-year decrease of Shandong and Henan markets with the first two largest demands respectively is 3.51% and 30.39%; the proportion of Shandong reaches 29.57%, which increases by 0.2% compared with the same period in 2015. The year-on-year increase of Hebei, Anhui and Shaanxi is respectively 27.55%, 6.78% and 104.32%; compared the same period in 2015, the proportion of these three areas respective increases by 3.8%, 1.44% and 4.19%.

The demand structure changes dramatically and the large scale is not the trend any more

After many years’ trend of large scale, the self-propelled wheel type grain combine harvester market eventually gets achievements in 2016 and the large scale become the reality from the trend.

From the perspective of the machinery with various feed quantities, the increase of the large feed-quantity machinery is obvious. According to the market survey, by the end of August, the sales volume of machinery with the feed quantity respectively lower than 6 kg/s, 6 kg/s and above 7 kg/s respectively is 1.23 thousand sets, 21.9 thousand sets and 24.2 thousand sets, the year-on-year increase of which is respectively -79.48%, -39.51% and 234.25%; and the proportion of machinery with these three kinds of feed quantities respectively is 2.6%, 49.19% and 51.21%, which respectively increases by -9.53%, -27% and 36.53% compared with the same period in 2015. Thus, we can find that China has completed the transition from the trend to reality in terms of self-propelled wheel type grain harvester market demand machinery and China has entered the era of demand for the large-sized machinery.

Two powerful enterprises control the market jointly and the competition undercurrent flows

The market of self-propelled wheel type grain combine harvesters has been dominated by the Lovol Heavy Industry Co., Ltd. for many years in China. But, in recent years, with the rising of the Zoomlion Heavy Machinery Co., Ltd., the competition pattern that the two powerful enterprises control the market jointly forms. According to the market survey, by the end of August, the sales volume of Lovol Heavy Industry Co., Ltd. and Zoomlion Heavy Machinery Co., Ltd. accounts for above 70% of the whole market sales volume.

By means of analysis on the first five brands in terms of sales volume, the accumulated sales volume of these five brands is 41.3 thousand sets, the year-on-year decrease of which is 1.43%; the proportion is 87.18%, which increases by 2.41% compared with the same period in 2015.

The market competition of the self-propelled wheel type grain combine harvester concentrates on the brand. As the leading enterprise of the city, for Lovol Heavy Industry Co., Ltd. its huge social inventory forming for a long time creates the strong brand influence, completes the distinction with other brands. While, Zoomlion Heavy Machinery Co., Ltd. gains the successful experience of Lovol Gushen wheat harvester industry, catches up from the behind and becomes the largest challenger.

In the meantime, with the gradual penetration of the famous brands such as Kubota etc., the market competition pattern forming for many years is tottering. The market competition has not ended. China has entered the products-based era and the future market will enter an era when the powerful enterprises control the market by means of their products.

Supported by the wrinkle factor, the market may end with the small increase

Although the market of the self-propelled wheel type grain combine harvester experiences the twists and turns and ups and down in the first 8 months, but there is a small decrease at the beginning of September. But by means of analysis on the results of the whole year, after the last 4 months, the market may end with the small increase.

Main reasons originate from following factors.

Firstly, the “depression” of the market’s demand forms. After experiencing the decrease continuously in 2014 and 2015, the market demand “depression” of the self-propelled wheel type grain combine harvesters has formed.

Secondly, there is the sufficient market demand motivation. As the mature self-propelled wheel type grain combine market, demand upgrade has already become the market engine. By calculating as per the upgrade cycle of 3.5~4 years, the upgrade climax will be forming in 2016, because the sales volume before three years (i.e., in 2013) reached up to more than 50 thousand sets, the year-on-year increase of which was above 30%.

Thirdly, from the perspective of the monthly trend of the market in 2106, the year-on-year decrease is large from the January to April; the increase begins during the period from May to June and this increase trend continues all the time until July and August. Thus, we can find that the delayed effect of the market development is still strong.

Fourthly, although there is the small decrease in the first 8 months, the formed larger sales volume has already approached to the level of sales volume during the same period of 2015. Even if the small decrease occurs in the last 4 months, the accumulated sales volume will exceed the level of the same period in 2015.

Based on this, we can judge that the market sales volume of the whole year may reach up to about 48 thousand sets, the year-on-year increase of which will be about 2%.

销量 Sales volume 

同比： On year-on-year basis