Dealer discontinuing NH line

[Robert_in_NY]

One other thing I am curious is to the profit margin between the ag tractors and the compacts. If the dealer makes $1k profit on each compact because of how competitive the market is compared to $10k for each ag tractor (rough numbers, could be more or less as I don't know for sure but a $100k-$300k tractor has to leave some room for profit). Basically, the dealer would have to sell 10 times the compacts as he would ag tractors to equal the same profit. They you have 10 times the machines to warranty and 10 times the paperwork. Of course you get 10 times the parts sales and most dealers tell me the real money is in parts.

I think it all comes down to the dealer. If they look at the numbers and the numbers are similar to what I just posted they might figure why stock a ton of compacts, put a few out there and when they sell you replace them with new inventory while taking orders the entire time. The Kubota dealers don't have too many decisions to make other then how many compacts they want to stock. Unless the dealer is near the country they don't stock very many of the large utility tractors. And I have not found a pure Kubota dealer that stocked any implement other then the basic 3pt implements all tractor owners want/need/desire

I know there was a compact/lawn mower John Deere dealer in Springville. That is all they dealt with and from my dealings with them talking utility vehicles a long time ago they seemed like good people. They are now part of a large JD chain. I am not sure if they just couldn't make it selling only compacts and lawn mowers or if the owner just wanted to sell or if Deere forced them to merge with the larger store.

 

[flusher]

I just walked into my nearest New Holland dealer to look for a Clevis pin because they always have a good line of accessories. Posted all over the front door was a notice saying that they were going to discontinue carrying the New Holland line as of December 31, 2007. No specific reason was given and when I asked I was told they were looking around for another line of tractors to carry, although they've been a Ford/NH dealer for 50+ years.

I'm feeling kind of good that I bought a Kubota and not a New Holland machine. The dealership is in Albuquerque, NM.

I went with Kubota in May05 when I bought a new B7510HST/LA302 FEL from the dealer in Redding CA. Six months later he was out of business after more than 30 years selling Botas (squabble among the children of the late owener over whether to sell the business or continue on). A JD dealer in Redding picked up the Kubota line.

 

[N80]

I'm just guessing here (completely), but I'd bet there is more profit, or mark-up at least, the smaller the tractor is. Compare the price, for instance of an average sized, fancy, HST, 4x4 compact tractor to something like a basic 7040. The 7040 may cost twice as much but it is way more than twice as much tractor.

Now, the sales guy I dealt with when I bought my L4400 told me the margins on the basic L series were tiny, which makes sense, it is a very very basic tractor with almost no remarkable features other than general hp and, of course, the price. (And he still gave me an awesome deal on it.)

 

[Robert_in_NY]

I am not sure how big the 7040 is but I am going to assume it is a utilty tractor. When you start getting into the large 8000 series tractors you are talking prices of $100k. Deere seems to sell a lot of 8000 series tractors every year and CNH sells the T8000 (TG) and the MX line for Case-IH. I haven't priced any recently but I think they are going to stay priced up with the Deere's and in the US the MX out sells the NH version. The largest articulated tractors cost $300k+. Even the T7000 from NH is a $60k tractor or more depending on options. When I priced a TS-A a few years ago it was over $55k. I am not sure but I would think the higher the price the more room there is for profit. I know Dodge use to make a ton of money on the Caravan and the Ram pickup. I think around $10k for each truck sold. However, the cars they sold that had to compete for sales didn't earn anywhere near as much profit because of the competition. The Ram was selling because of the look and the Caravan was the leader in the minivan market so they could charge a premium.

Having said that, there is a lot more competition in todays market in the compact market then there is in the ag market. Ag wise you have Agco, CNH and Deere. Compact wise you have those three as well as Mahindra, Kioti/Bobcat, Kubota, Cub Cadet/Yanmar and all the other smaller companies that rob sales from the big outfits. Competition equals lower prices and lower profit.

 

[Rara Avis]

One other thing I am curious is to the profit margin between the ag tractors and the compacts. If the dealer makes $1k profit on each compact because of how competitive the market is compared to $10k for each ag tractor (rough numbers, could be more or less as I don't know for sure but a $100k-$300k tractor has to leave some room for profit). Basically, the dealer would have to sell 10 times the compacts as he would ag tractors to equal the same profit. They you have 10 times the machines to warranty and 10 times the paperwork. Of course you get 10 times the parts sales and most dealers tell me the real money is in parts.

I think it all comes down to the dealer. If they look at the numbers and the numbers are similar to what I just posted they might figure why stock a ton of compacts, put a few out there and when they sell you replace them with new inventory while taking orders the entire time. The Kubota dealers don't have too many decisions to make other then how many compacts they want to stock. Unless the dealer is near the country they don't stock very many of the large utility tractors. And I have not found a pure Kubota dealer that stocked any implement other then the basic 3pt implements all tractor owners want/need/desire

I know there was a compact/lawn mower John Deere dealer in Springville. That is all they dealt with and from my dealings with them talking utility vehicles a long time ago they seemed like good people. They are now part of a large JD chain. I am not sure if they just couldn't make it selling only compacts and lawn mowers or if the owner just wanted to sell or if Deere forced them to merge with the larger store.

Here is a business review of a John Deere Dealership....

Dealership learns lesson: industrial, ag don't mix. | Manufacturing > Machinery Manufacturing from AllBusiness.com

Strader set out a plan to develop the agricultural business over 2 years. He realized he and his sales, parts and service personnel needed time to become familiar with the agricultural business. It didn't take them long to begin to get an education.

"We learned a lot in a few months," Strader said. "We were not aware the competition was so great.
"There is practically no such thing as customer loyalty in the ag business. Customers will price shop from dealer to dealer, and they don't mind driving for miles."
That fact causes many ag dealers to slash profit margins to the bone. Those who sell the greatest volume and those who have the least overhead have the greatest chance of making a profit.
Dealerships like Bruce, that have excellent facilities and emphasize customer service, are at a disadvantage in a volume sales market.
"We had heard about low profit margins on farm equipment," Strader said. "But we did not believe the margins were as low as they are."
On top of low margins, Strader said, his ag customers expected equipment demonstrations and high trade-in value for used equipment. They also expected loaner equipment when theirs was being serviced. And they expected an ag business to make financial contributions for meetings, awards and field days.
"There was simply not enough profit in ag equipment for us to meet, all the customers' expectations," Strader said.
After 3 years of struggling with the ag business, Strader attempted changes he hoped would improve his chances of making a profit.
Trade-in allowances were reduced. Profit margins on new equipment were set at 8 to 10 percent, well above the 4 percent or less offered by some volume dealers. Shop rates that had been 22 percent lower for agricultural than for industrial customers were increased. There was even discussion of forming a separate corporation to run the ag business.

 

[jmfox]

In my area there is a ford car dealer that under sells the competition. They have been successful for many years. When I bought my last truck I first tried a friend of mine who owned a dealership. He gave me a price that sounded good until I noticed the exact truck I wanted at another dealership. I stopped in and was amazed at the low price. I called my friend and he suggested I buy it there since he cannot match the price. Even though dealers pay the same for cars, it appears that the larger (actually largest) dealer sells cars for less because he is relying on volume incentives from the bank (floor plan) and manufacturer. I don't expect construction equipment to have the same incentives, but there must be some incentive for volume sales. This Ford dealer also keeps his warranty shop in the black and capitalizes on this by running it 24/7. (Two years after this my dealer friend sold his dealership and went to work with the large ford dealer.)

Equipment territories are not the same, so they are more often competing against other brands rather than other dealers, but if manufactures reward dealers for volume there could be a win win win.

jmf