Japan Tractor Market - Industry Analysis & Forecast 2024-2029

INDUSTRY OUTLOOK

The Japan tractor market witnessed shipments of 33.2 thousand units in 2023 and is expected to reach 43.3 thousand units by 2029, growing at a CAGR of 4.54% during the forecast period. The market is expected to witness considerable year-over-year (YoY) growth due to the following factors:

1. Farm Labor Shortage: The agricultural sector is experiencing a labor shortage, driving the demand for mechanized farming equipment, including tractors. Tractors enable farmers to perform various tasks more efficiently and productively, relying less on manual labor.
2. High Demand for Efficient and Advanced Tractors: Farmers increasingly demand efficient and advanced tractors to reduce operating costs and improve productivity. Tractors with advanced features like GPS guidance, telematics, and precision agriculture capabilities are in high demand in the Japan tractor market. In addition, companies have invested in fuel-efficient tractors that can run on non-conventional fuels like biodiesel and others.
3. Launch of Several Schemes in the Agricultural Sector: The Japanese government has implemented various schemes to promote agricultural mechanization. These schemes typically provide subsidies or financial assistance to farmers to purchase agricultural machinery, including tractors.
4. Shift Toward Electric-Powered Tractors: Electric-powered tractors have gained popularity due to their environmental benefits and lower operating costs. Electric tractors produce zero emissions, which helps reduce greenhouse gas emissions and air pollution. In addition, they have lower operating costs than diesel-powered tractors, as electricity is cheaper than diesel fuel.
5. Advent of Intelligent & Smart Tractors: Intelligent and smart tractors are equipped with advanced technologies, such as artificial intelligence (AI) and machine learning (ML), which enables them to perform tasks more autonomously and efficiently. Intelligent tractors can self-drive, navigate fields, and make decisions about crop management.

In addition to the above factors, the growth of the Japan tractor market is also driven by the increasing demand for food products and the expansion of agricultural land. Farmers have adopted mechanization to meet the growing food demand and improve profitability.

KEY HIGHLIGHTS

1. Japan's agriculture industry is expected to grow in the coming years, driven by increasing population, rising urbanization, and changing dietary patterns.
2. The Japan tractor market is highly concentrated, with the top players controlling most of the industry. Domestic and global brands, on the other hand, are equally represented in the industry.
3. The Japan tractor market increased by 3.6% in 2023 compared to 2022. The increase in crop production and tractor sales was due to government support for farmers and favorable climate conditions.
4. Several government plans, schemes, and initiatives to facilitate credit and improve agriculture-related operations will contribute to the industry's overall value chain growth.

MARKET OPPORTUNITIES

Increasing Use of Bioenergy in Agricultural Tractors

Conventionally, farmers used diesel-engined tractors known for their high power. Due to advances in machine technologies and engines, tractors are now more efficient and can complete tasks with fewer power requirements. However, the volatility in diesel prices hampers farmers' budget management. Thus, the Japan tractor market witnesses a considerable demand for tractors that run on different fuels, such as plant-oil and biogas-powered tractors.

Technological Advances in Tractor Technology

A new frontier of innovation emerged as agriculture met digital technology, opening various paths to a smart agricultural future. Tractor manufacturers are competitive, and companies constantly strive to innovate and ensure product differentiation at affordable prices. State-of-the-art technology-based tractors are currently available in the industry. GPS and remote sensing make farming more accurate and productive.

SEGMENTATION INSIGHTS

INSIGHTS BY HORSEPOWER

The Japan tractor market by horsepower is segmented into less than 25 HP, 25 HP- 35 HP, 36 HP–45 HP, 46 HP- 65 HP, 66 HP- 100 HP, and above 100 HP. In 2023, the 36-45 HP segment recorded the highest share in the Japanese industry. The major factors for the increasing growth of this range of tractors are increasing farm size and consolidation of farms, adoption of precision farming, availability of average-sized farms, and operational flexibility. The 36-45 HP segment caters to medium-scale farmers owning 10-20 acres of land. Here is a breakdown of some key points:

1. Popularity: These tractors are popular due to their versatility. They can handle various tasks, such as soil preparation, irrigation, weeding, harvesting, hauling equipment, and crops.
2. Growth factors: The growth of this segment is driven by increased business turnover among hobby and livestock farmers and the need for efficient tractors due to rising fuel costs.
3. Major Players: John Deere, CNH Industrial, AGCO, and Kubota are some of the leading brands in the Japan tractor market, likely offering options in the 36HP-45HP range.
4. Trends: Technological advances, such as precision agriculture using GPS and bio-fuel options, have gained traction in the Japan tractor market, and these features might be available in some 36HP-45HP models.

Overall, the 36HP-45HP tractor segment is crucial for Japanese agriculture, and its future looks favorable due to rising farm mechanization and a growing demand for efficient tractors.

INSIGHTS BY DRIVE DRIVE

Ease of driving and flexibility with light loads and in plain fields are major factors that boost the demand for two-wheel-drive tractors in the Japan tractor market. Japan has many small-scale farmers, with an average farm size of ten hectares. Therefore, farmers prefer to own compact-size machines or equipment. In Japan, power paddles are attached to 2WD for use in wheat plantations. John Deere, New Holland, and Claas share most of the 2-wheel drive tractors segment. Also, players are trying to redesign their 2WD tractors with more power and ease of handling features so that farmers can upgrade their tractors and buy new ones for their use.

REGIONAL ANALYSIS

The Hokkaido region has the highest demand for agricultural tractors across the Japan tractor market, accounting for a share of 32% in 2023. Large-scale farming operations are what characterized Hokkaido. The region is ideal for farming various crops because it has an abundance of flat plains and a colder climate. Hokkaido's greater land availability enables extensive farming methods.

COMPETITIVE LANDSCAPE

The Japan tractor market is characterized by various global vendors that account for most of the market share. Therefore, it would be difficult for new players to compete with well-established vendors in the market. The key competitive factors of the market players include efficiency, product reliability & availability, after-sales service, and price. John Deere, CNH Industrial, AGCO Corporation, and Kubota dominated Japan's tractor market with a collective market share of over 60% in 2023. These brands have adopted several strategies to gain traction in the industry. These companies invest heavily in research and development (R&D) to develop new and innovative tractor technologies. They have also expanded their presence in emerging markets to capitalize on the growing demand for agricultural tractors.

Various tractor companies have acquired or partnered with technological companies to improve their offerings nationwide. Vendors invest in R&D to develop fundamental technology to establish competitiveness by enhancing core product technology in Japan's tractor market. Vendors differentiate themselves by enhancing product development, focusing on after-sales business, and cutting costs through greater operational efficiency.

1. SOLIS launched electric tractors to compete with market leaders and various new models for specific markets. The company targets the tractor segment with a power range of less than 100 HP and aims to double its market share.
2. Mahindra & Mahindra launched the OJA platform, which will launch multiple tractor models under 120 HP.
3. TYM Tractors offers products with multiple additional accessories like digital solutions attached to the tractor.

Competition in the industry in the pursuit of large-scale farming is intense. Agriculture industries experiencing slow growth tend to foster a competitive environment heavily influenced by price due to supply balancing demand.

1. Price competition tends to be more significant for new tractor orders than after-sale services. Considering the forecast for 2029, pricing for new tractor orders is expected to be a particularly influential competitive factor.
2. Competition in the aftermarket portion is primarily against large, well-established national and global competitors and, in the country, against the local companies.