Yes, that gives LS a leg up in its service parts base. I have never been a fan of rebranded tractors, in the long run I think LS will service and sell much more direct and maybe phase out their relationship with NH.
If NH wants to be in that market segment, they should just have components made and assemble the final tractor themselves.
Tom,
I think you're onto something there. Interesting business strategy on LS's part. They do contract mfg. for others, i.e., NH which helps them defray their cost for capital expansion, OH, etc., probably selling at paper thin margins in the re-badging market. At the same time they enter the US market under their own brand name, with better margins taking the business direct, using re-badging as a cushion. In the meantime, if their smart, they start building their own infrastructure, i.e. dealers, territory reps., marketing, etc., with their sights set on building brand recognition, and the ability to command higher margins due to market acceptance (higher prices).
Contract mfg is a cut throat business, with the buyers having exceptional leverage over the mfg.
From my limited view of the world, LS's biggest weakness is their Dealer Network and brand recognition. As I shared with GMan, finding LS dealers is like a guarded secret. This is in sharp contrast to say Kioti. I used TSO's Kioti dealers locator and pulled up 5 locations in my area. I suspect this is to limit competitive bidding on the buyers part. Also that their network is probably pretty thin, as they're in the building process. I doubt that LS has 2 or more dealers in my area. I might be wrong. It's had to find out. Almost like a protected territory for their Dealers, whether that is intentional or just taking time in building the network. That's why I'm interested in what Maka knows about LS's network, since he was a dealer. Obviously what I've stated thus far is speculative thought on my part.
LG probably has guidelines that they issue to LS as return on invested capital, and probably charges a fee, similar to a bank. So, if they (LS) decide to mfg. their own engines, they have to do the ROI. They have a limited source of funds and no doubt LG requires accountability. So they have to spend their dollars wisely. They can wait till they get their volume direct numbers up high enough and then switch over to their own mfg, where they have more control and greater margin. Again speculation on my part.
I'm looking at this thru the prism of someone who, like you, is interested in tractors, their use, quality and affordability. But, I am also looking at this from the business strategy point of view, which is where my background is really stronger. I've tried to put myself in the place of LS and LG.
BTW, like others, I think the names are terrible, but if you were Korean, you'd probably think all English names are wacky, hence LS, LG, Kioti, etc. Asians can have a hard time in grasping certain words and the impression or meaning they convey.
Just my thoughts...interested in what the rest of you think. Makes for interesting reading & discussion.
John
