Price Increases For Tractors and Implements - Messick's Video - 6/28/2018

[jeff9366]

Interesting price perspective from Messick's. Published June 28,2018.

HOW HIGH WILL PRICES CLIMB? - TMT - YouTube

 

[NYCheese]

I don't know if it's necessarily related to the steel prices, but I can tell you that Kioti's current promotions end tomorrow, and if I had waited until monday to purchase, my TLB would've been 300 dollars more, because the cash rebates are going down a little bit. I realize that's chump change when talking about a 30k purchase....but hey, 300 bucks is 300 bucks.

 

[rngrrymd]

Jeff, this is great info you are throwing out to the members with linking this video. I've always been more of "I'll buy it new and run it till it dies" guy myself in cars and now in buying a tractor so I get a product with warranty and I can create the history of use and maintenance on that vehicle. That being said - a ton of guys on here love looking for the deal for a good piece of used equipment at a great price and that shiny unicorn is going to be harder to get soon with the steel tariffs etc being put into place to protect American jobs. The big issue as Neil says is the treasury rate going up. Several manufacturers I looked at did not have good finance rates (Kioti, Massey) available and Deere, Kubota, CNH may start pulling 0% offers in the future. Between financing and if new tractors go up in pricing there is going to be an even higher demand on used equipment which will raise prices/values on used equipment thus making the shiny unicorn used tractor deal even harder to find. Once again, great info and thank you for posting.

 

[rngrrymd]

Interesting price perspective from Messick's. Published June 28,2018.

HOW HIGH WILL PRICES CLIMB? - TMT - YouTube

I want to post some more comments regarding potential price increase on tractors. I am seeing price increases in other fields in regards to tariffs and with how many compact tractors and/or components for compact tractors are made overseas I believe several different things will probably happen in the near future as touched on in Neil's video:

1. List prices and/or distributor costs are going to go up
2. Discounts are going to get tighter (some manufacturers may up the dealer cost but keep the list the same to hide the increase in price from consumers)
3. Financing deals may get less aggressive. (direct results of fed raising rates and/or in-house financing being used to create revenue to cover manufacturing losses)

I work in the Wholesale HVAC/Plumbing/Generator industry and we are getting notices of tariff charges and/or price increases directly related to tariffs. A major generator manufacturer just announced to us a 3% price increase coming next month because of increased costs due to tariffs. One of the biggest manufacturers of components for oil burners for boilers is assessing tariff charges as well. Most of the tariffs set by the US are designed to hit China the hardest to push manufacturing back to the US but many other countries are being affected as well. The US and South Korea revised their trade agreement back in May and the US exempted South Korea from the 25% steel tariff they imposed but their exports are now limited to 70% of their previous average. South Korea is also still subject to a 10% tariff on aluminum. LS M-tron (LS, NH Boomer, Case Farmall A), Daedong (Kioti) and Tong Yang Moolson (TYM - maker of TYM, Rural King, some Mahindra and owner of Kukje (Branson) are all Korean companies and will be affected by the tariffs/trade agreement. Kubota, Yanmar (Yanmar tractors, motors in Deere and others) , Iseki (Massey), Shibaura are all Japanese manufacturers - the US is still working on a bi-lateral trade deal with Japan. Japan is currently being hit with the 25% steel tariff until a trade agreement possibly exempting them is finalized. Many components and/or whole tractors are sourced from these 2 countries and as the year progresses this will have an effect on pricing and availability.

If inventory becomes affected and dealers have less inventory to sell or lead times start pushing out from material shortages then you can expect dealers to tighten up their discounting. About 1-2 months ago I noticed John Deere dealers were splattering actual prices for equipment all over Tractorhouse and today they are back to mostly "call for price" which is that annoying tactic us tractor buyers are stymied by but which protects dealers from exposing themselves to losses due to prices that are not adjusted for market conditions. E.G. - On 07/31 I posted a link to a listing on Powerplace, a John Deere dealer, for a 2032R which listed the tractor with a $6k discount. Powerplace has been listing their tractors with a discount for over a year but on August 1st the pricing discount was removed and now the list price only is being posted on their site for almost all their tractors. I think that website pricing strategy change is foreshadowing possible price increases.

Financing is another avenue that will mostly affect those purchasing new tractors and using in-house financing. The Federal Reserve has raised rates from .75% to 2% in the last 2 years and they are contemplating 2 more increases before the year is out. This is costing customers more $$ per month and affecting monthly payments (also think car rates, mortgage rates, your credit card rates as well) My bigger concern is that some 0% offers will move to 1% or 2% because of increased borrowing costs by the manufacturers and could profits from financing be considered as an offset to increased costs manufacturers are experiencing. The end result for us, the consumers, is increased cost of both tractor purchase and financing cost.

The upside to the trade tariffs is the creation of new manufacturing jobs in the US. The downside is what is looking to be price increases at least in the short term before steel mills in the US come back to full manufacturing output. Anyone that is shopping for a tractor has to move at a pace that is comfortable for them - I looked at tractors online for at least a year and once I visited dealers and test drove tractors my preconceived notions of what I wanted changed and evolved until I made my purchase - but if you are looking right now you may want to up that pace a little and make that decision or expect to pay more because I agree with Neal @ Messick's that price increases are coming based on what I am seeing in the industries I am involved in. I'm sure some will respond to this post that the competitiveness of the market will keep everything in line but if Kubota or John Deere are forced to make price moves then it won't be long until you see the other manufacturers adjust as well.

 

[RandyinTN]

I will gladly pay slightly more for a tractor if it will put China in there place

 

[Geotech]

Long video to basically say what we all already know. For one reason or another, life will be more expensive in the future. This includes tractors. Of course, a dealer would like to raise prices and blame it on tariffs.

However, a tariff on raw steel is not necessarily a tariff on tractors or products that happen to have steel in them. Tractors may or may not be affected by tariffs. It is possible that, for example, if there was a tariff on wheels, but not tractors, it could be more expensive to manufacture parts overseas and assemble here (importing wheels), vs importing the complete tractor from overseas.

I am not saying there is not a new or increased tariff on tractors, I'm just saying it is more complicated than new tariff on steel = higher tractor prices. Now, tractors may be on the list of thousands of individual products slated for new tariffs. I haven't read the list because, well, I have other things to do.

Here is another thing about trade deficits that most people do not know: When you buy an Iphone (for example) the entire value of the Iphone counts towards the US-China trade deficit. This is despite the fact that the value of the phone is comprised of its many components, most of which are manufactured in other countries (including many European countries) and the phone is simply assembled in China. This is true for countless products and leads to a highly inflated measure of trade deficit with China. Our true trade deficit with China is much, much lower than our metrics indicate. The magnitude of the deficit is actually distributed among more countries, but gets concentrated on China since so many things are assembled there.

In reality, putting tariffs on imports and raising prices on US consumers and eventually hurting our own economy is not the solution. The only REAL way to balance a trade deficit is to increase exports (products or services) to match the value of imports. Tariffs are artificial and arbitrary price biases which are simply ways for governments to pick and choose winners within their own country, whether intentional or not. They screw with the nature of a free economy and make it difficult to make rational business decisions. Think about it: when you go to war with another country, you try to limit their access to goods and services. These are called sanctions. Without getting into semantics, a tariff is essentially a form of self-imposed sanction.

This stuff gets complicated. But needless to say, for one reason or another, a tractor tomorrow will cost more than a tractor today - because life.

 

[RandyinTN]

All trade should be free or charge the other country the same tariff they are charging us on similar items. Pretty simple concept.

 

[cdaigle430]

I truly believe America is innovated enough to prosper from this 10 fold. Look at what happened with oil prices, oil prices were going so high, Americans got into shale oil. That produced many jobs and as a result of it indirectly and indirectly oil dropped so low we were paying $1.70 a gallon of gas. OPEC couldn't compete wit us anymore as we became the worlds leading oil export so they increased oil production which brought shale oil to its knees. As you can see oil prices are on the rise but cautiously as they know if it reaches a certain price our oil engines will start right back up again.
Same goes with any product-we can compete with the likes of China if they are brought to the same level playing field or at least close to it.

 

[ruffdog]

I will gladly pay slightly more for a tractor if it will put China in there place

Just wondering.....who will get the extra money you pay and what will it be used for?

 

[Geotech]

Randy, What if the country we import goods from does not want our exports of the same type? Having equal tariffs on equal goods does not balance the equation in that case.

cdaigle, I hope that is what happens, but I have some reservations about it. The difference would be that in the case of oil, the sellers raised the price too high to all buyer nations. In the case of these tariffs, we are raising the price on ourselves while these products will still be very affordable to other nations. In fact, steel will be even MORE affordable to other nations if China continues to devalue the yuan. This might put a country like Canada or Mexico in a place to more affordably produce goods which could be exported to Europe or other countries. I know the US is a big buyer, but we're not the only buyers. Plus, a 25 percent increase in the price of steel does not have nearly the affect of a doubling of the price of gasoline. It seems that these tariffs are enough to slow growth, but not enough to create the pain required for innovation.

We're in a bit of a conundrum in our country. We excel at service (professional, design, financial, etc.) nowadays. So, China stealing, or taking by force, intellectual property, is my biggest concern. We're still cranking out our own war machines as far as I know, so I think we have security in terms of manufacturing, though we are vulnerable from a consumer standpoint. We are probably vulnerable from a natural resources standpoint due to dwindling mining operations. Not too sure about that one.

On one hand, we have a bunch of unemployed factory workers. On the other hand there is a huge shortage of electricians, plumbers, welders, etc. These are good jobs that, with a couple years experience can pay as good as any factory job. And the barrier to entry to start your own small business (the backbone of our economy) is a heck of a lot lower for an electrician than for a manufacturing plant.