Brazilian Agricultural Tractor Aftermarket Growth Opportunities

The Impact of the Top 3 Strategic Imperatives on the Brazilian Agricultural Tractor Aftermarket

Competitive Intensity

Why

• Year-round harvests, an aging tractor fleet, and high fleet utilization are driving year-on-year tractor growth in Brazil. Agriculture original equipment manufacturers (OEMs) across the globe, therefore, are keen to invest in the country.
• The Brazilian federal government is introducing tax incentives to encourage investments from international players and promote sustainable practices in the automotive industry.  
• Brazil will be a key focus for OEMs looking to expand manufacturing operations into emerging markets and strengthen their supply chain.

Frost Perspective

• The entry of international OEMs will increase the competitive intensity of agricultural equipment. Low-cost options and upgraded technology in tractors are expected to significantly reduce unit prices, resulting in increased mechanization and adoption.
• The expansion of OEM manufacturing plants, R&D operations, and remanufacturing centers in Brazil will widen opportunities for local aftermarket suppliers.

Industry Convergence

Why

• Regional challenges in key global hotspots such as the United States, Europe, and China will push manufacturers and suppliers to expand their presence in emerging and stronger markets.
• Nearshoring will be a key strategy adopted by industry stakeholders to counter economic, political, and supply chain challenges.

Frost Perspective

• Increased demand to track and quantify agricultural operations will bring a wave of digital technology start-ups into this market.
• The focus on sustainability will also result in collaborations between OEMs, battery suppliers, and sensor suppliers.
• With the expansion of mechanized operations, there will be more vertical integration between suppliers and industry stakeholders to provide solutions that enhance customer convenience.

Innovative Business Models

Why

• Business model innovations have become essential to changing customer demands. Companies are innovating at every stage of customer interaction to lock in business.
• OEMs, in an attempt to achieve sustainability targets, will introduce new solutions to drive sales of remanufactured components.

Frost Perspective

• OEMs are introducing Equipment-as-a-Service (EaaS) models, online marketplaces, rebuild strategies, and aftermarket solutions to compete in this market.
• Major innovations in this space will drive positive cash flow to the service providers and decrease the total cost of ownership (TCO) for the customers.
• Flexibility in purchase options with different service packages will drive higher customer acquisition and better market targeting while achieving sustainability goals.

Scope of Analysis

Objectives

• Analyze market service and maintenance trends and growth for the agricultural tractor aftermarket.
• Evaluate market demand for select aftermarket components.
• Examine market status and understand what market expectations are until 2030.

Key Questions This Study Will Answer

• What are the main areas of demand and growth?
• Who are the top industry participants, and what is the market size for the agricultural tractor aftermarket in Brazil?
• What are some of the key customer purchase trends in Brazil?
• What are the main factors and trends shaping the growth of the agricultural tractor aftermarket industry?

Scope

Competitive Environment

Growth Drivers:

Increase in Total Agricultural Tractor Equipment in Operation (EIO):

The total agricultural tractors in operation is expected to have a CAGR of 1.9% between 2023 and 2030 to reach 1.6 million units, creating significant aftermarket demand.

Increasing Competition between OEMs and Suppliers:

The spike in Brazilian crop yields has had a direct impact on new tractor sales. With increasing tractor demand, OEMs and suppliers are expected to set up manufacturing plants and expand their aftermarket presence in the region, driving total revenue growth.

Fleet Age:

Over 50% of Brazil's tractors are over 15 years old, which directly results in increased demand for repairs and aftermarket components. Government policies, such as the Plano Safra, are aiming to reduce the total fleet age. However, the overall impact of increased fleet replacement on the aftermarket is expected to persist in the longer term.

Inflation and High Interest Rates:

The continued effect of inflation and high interest rates is expected to delay customer purchase decisions on new equipment. Farm owners are expected to extend equipment life until inflation and interest rates recover, driving aftermarket demand.

Online Channels to Market:

The growth of eCommerce and online platforms has had a significant impact on the aftermarket. Mobile applications, aggregator platforms, and online marketplaces provide access to a wide range of used equipment and spare parts, allowing equipment owners to retrofit the equipment or extend its life.

Growth Restraints:

Government Investment and Focus on Sustainable Practices:

Brazil’s Plano Safra 2023–24 allocates $73 billion to strengthening environmentally sustainable production systems in agriculture. The plan is expected to push farmers to adopt sustainable practices, increasing fleet replacement rates.

Aftermarket Capabilities for Developing Technologies:

With the emergence of connected/smart retrofits and automation, the tractor aftermarket is facing challenges with regards to repair and maintenance.

Lag in Development for Domestic Companies:

The Brazilian agricultural tractor aftermarket is heavily reliant on international stakeholders for high-quality components.

Key Competitors

Lubricants

• Iconic
• BR Petrobas
• Moove
• Shell
• Petronas
• YPF
• Energis 8
• Quaker Houghton
• Total Energies
• Castrol

Aftermarket Components

• Delco
• Bosch
• Elmot
• Mahle
• Valeo
• Hitachi
• Denso Corporation
• Marelli Europe s.p.A
• Mitsubishi Electric
• Prestolite
• Dynamo
• HL Mando
• Denso
• Sanden
• York
• Delphi