The domestic agricultural machinery industry leaders, Daedong and TYM, both reported disappointing results last year with a sharp decline in operating profit. The reduction in demand for tractors below 100 horsepower in their main export market, North America, is believed to have influenced this.
The two companies are expected to launch more aggressive promotions to defend their market share in North America, which accounts for nearly 70% of their total sales. They both aim for a market share target of '10% achievement.'
An analysis of the 2024 performance of the two companies on the 20th shows that Daedong's sales last year amounted to 1.4128 trillion won, a decrease of 1.4% from the previous year, while its operating profit totaled 16.5 billion won, down 75%.
In terms of net income, which refers to the final profit excluding operating expenses and special gains, the figure turned to a deficit amounting to 51.9 billion won.
The situation for TYM, which announced its performance on the 18th, was similar. TYM reported that its 2024 sales decreased by 5.7% to 788.8 billion won. Operating profit fell from 76.5 billion won to 15.3 billion won, a decrease of 80%. Although it maintained positive net income, it dropped nearly 70% to 18.6 billion won from 60.4 billion won the previous year.
The decline in sales for both companies was influenced by the significant drop in North American sales, while their domestic operations somewhat defended overall sales.
According to the Association of Equipment Manufacturers (AEM), a U.S. organization for construction, agricultural, and industrial equipment manufacturers, the sales of small and medium-sized tractors under 100 horsepower, primarily held by Daedong and TYM in the North American market, are estimated to be approximately 200,000 units in 2024, a decrease of 13% compared to the previous year. This is a larger drop compared to when the demand for 'hobby farming' from small-scale farmers spiked abnormally due to COVID-19, peaking at around 300,000 units.
The drastic reduction in operating profit is reportedly due to aggressive promotional spending aimed at defending market share in North America. Furthermore, the continuous rise in shipping costs is also considered one of the factors contributing to this.
Despite the unfavorable market conditions in North America last year, both companies have announced that they achieved their highest market share to date. Daedong recently stated that it attained an 8.7% market share in the sub-100 horsepower market, the largest since establishing its North American subsidiary in 1993. Similarly, TYM has noted that it achieved close to '9%' market share in the same market.
Daedong and TYM expect the market to rebound starting this year, especially due to the replacement demand occurring every 5 to 10 years, as their sales volume effectively hit rock bottom last year. This is why they both set a common target of achieving a '10% market share in North America by 2025.'
To achieve this, Daedong is expanding its operations, which were previously focused on the east, to the west by establishing a new warehouse in Tumwater, Washington. The western warehouse, scheduled to open in April, will cover an area of 29,421 square meters (8,900 pyeong) and can store 3,200 tractors. It will also have the space to assemble 2,000 work machines annually.
A representative from Daedong noted, 'The east mainly grows fruit crops, so small and medium-sized tractors are widely used, but the Midwest is the largest production area for corn and wheat, leading to a higher demand for medium and large tractors.' He added that they plan to launch related new products and conduct region-specific promotions to expand their market share.
TYM is also accelerating its outreach in the North American market, actively promoting its 2025 new products at the 'NFMS 2025,' the largest agricultural machinery exhibition in North America. They plan to increase sales in the northeastern U.S. through the new TYM Northeast Campus opened last August.
In addition to expanding its own brand agricultural machinery sales, they are also actively increasing partnerships with other brands and aiming to boost their local dealers from the current 330 to over 400, thus intensifying their sales activities.
An industry insider stated, 'Typically, the North American agricultural machinery market has grown by 4 to 5% annually, but during COVID-19, low interest rates and increased demand for hobby farming led to an abnormal growth rate of 20 to 30%.' He mentioned, 'Considering the replacement demand for agricultural machinery from buyers in 2020, there is hope that the market will recover compared to last year.'
Another source expressed concern, stating, 'As the United States maintains a high interest rate of around 4.25 to 4.5% and the economic situation remains challenging, demand is expected to remain sluggish this year as well.' He added, 'This year will be a time to confirm whether they can maintain sales above 200,000 units and return to a growth trend, or if this will collapse.'