The Covid-19 has shown a direct and negative impact on this industry due to the disruptions in the supply chain and delays in the manufacturing of the tractors. Dealership network has been badly affected and this led to the sharp decline in the sales of tractors in the first quarter of 2020.

Rice, maize, and sugarcane are the most cultivated crops, with rice being the most mechanized crop. More than 70% of the cultivated area under Vietnam is mechanized. About 53% of agricultural tractors have a capacity of less than 12 HP, 35% have 12 to 35 HP, and 12% have a capacity of more than 35 HP. In the Mekong Delta of Vietnam, wetland rice is the most important crop. Tractors are mainly used in mechanized land preparation for crop production, such as rice, corn, and sugarcane. Increasing farm mechanization rates, rising costs of farm labor and shorter replacement cycles of tractors are the major factors attributing to the growth of the tractors sales.

Key Market Trends

Shortage of Agricultural Labor

In Vietnam, people prefer industrial jobs over agriculture, as agricultural production is declining. This situation is leading to a shortage of agricultural labor in Vietnam, during the farming season. There is excessive production of a few products with low quality, which is unable to cater to the demand for the new products required by the Vietnamese market. The competition for exporting the products has intensified, which has led to a decrease in the prices of crops. This situation has not helped the farmers to obtain a return on investments, who are unable to pay the labor costs. Therefore, there is a continuous decline in the labor force that depends on agriculture in Vietnam. As a result, the shortage of agriculture labor is acting as a primary driver for the growth of the tractors market, as the work of laborers can be replaced with tractors.

Less than 35 HP Dominates the Market in terms of Revenue

Farm mechanization is increasing due to a lack of farm laborers in Vietnam. Farmers prefer small and customized tractors for agricultural purposes due to small farmland sizes. Additionally, lesser fuel consumption by small tractors helps to empower small and marginal farmers. In this segment, the consumer bargaining power is expected to be high, as compared to high-powered tractors, due to the availability of a wide range of options and substitutes.

Tractors with less than 35 Hp occupy less space and can be used with greater flexibility. The ease of customization makes the farmers more amenable to experimentation, and consequentially. Therefore, manufacturers are willing to try new components and technologies in this segment before moving on to high-powered ones. Therefore, these factors lead the less than 35 hp tractors to hold the major market share in the country


Competitive Landscape

The Vietnam Agricultural Tractor market is consolidated with the presence of global players in the country. Kubota, CLAAS, Yanmar, VEAM are some of the major players operating in this industry. These companies are expanding their business activities by focusing on the new product launches, partnerships and investments. However, more than 70% of the tractors in Vietnam are imported for the domestic use in the agriculture.

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