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As technology makes equipment more autonomous, precise, and serviceable from anywhere, will dealers become less important? Or will they become an even more valuable technology-enabled partner to farmers?
Today, Shane Thomas (Upstream Ag Insights) joins us to unpack the underlying economics of ag equipment dealers in our latest, Business Model Breakdowns episode of AgTech So What?
As many know, dealerships are where most equipment gets sold, serviced, and supported. But the business model is more complicated than simply selling tractors and parts. And, it’s changing.
We examine dealers largely by breaking down Titan Machinery, the world’s largest CNH dealership, with around $US 2.5 billion in revenue and more than 100 locations across the US, Eastern Europe, and Australia.
The surprising part? The equipment itself isn't where most of their profits come from. While equipment sales make up the majority of dealership revenue, parts, service, and rentals generate the majority of gross margin.
In this episode, Sarah, Matthew and Shane discuss:
- How the agricultural equipment dealership business model works.
- Why parts and service are so important to dealer profitability.
- Whether technology could fundamentally change the role of the dealer.
- The role of equipment financing and inventory management.
- Why used equipment can create significant balance-sheet risk.
- How dealer consolidation changes the economics of the business.
- Agtech companies attempting to go direct to farmers.
- Whether trust and rapid service will remain powerful advantages for dealers.
Got a business model in ag you’d like for us to break down in a future episode? Let us know!
Useful Links:
- Investor Relations - Titan Machinery
- Will China’s cheaper tractors disrupt ag equipment? - Tenacious Ventures
- CNH
- Dealers AGCO Corporation, Fendt Australia, John Deere
- Blurring the Line Between Farmer and Ag Retailer - Tenacious Ventures
- Tech: SwarmFarm Robotics, Harrington Seed Destructor, Carbon Robotics
- 7 Powers - The Foundations of Business Strategy, Hamilton Helmer
For more information and resources, visit our website.
The information in this post is not investment advice or a recommendation to invest. It is general information only and does not take into account your investment objectives, financial situation or needs. Before making an investment decision you should seek financial advice from a professional financial adviser. Whilst we believe the information is correct, we provide no warranty of accuracy, reliability or completeness.
Companies: Titan Machinery • Topics: ag-retail, farm-machinery, business-model, agtech-ecosystem
