Tractor and farm machinery sales are steady compared to last year, but Tractor and Machinery Association (TAMA) president John Tulloch says the sector faces a few challenges.
“When business confidence in the cities is flat as is currently we expect to see a reduction in purchases of smaller HP models as fewer people choose to commit.”
TAMA year-to-date figures to the end of April showed 1104 sales across all HP categories compared to 1111 last year, a drop of 0.6%.
North Island sales decreased by 4.7% from 748 to 713, but South Island sales rose by 7.4% with 309 compared to 363 last year.
Tulloch says it’s interesting to note April national sales figures were down 11.7% compared to April 2018, partly due to a reduction in the smaller models. He predicts a drop in sales this year, mainly due to the sales drop off in the smaller models.
Confidence in the rural areas is strong, but Tulloch predicts a few developments that might impact future sales.
Tightening of credit conditions may be a factor. The Reserve Bank has signalled a requirement to increase the equity to loan ratio, which will affect the indebted rural sector.
Increase in shipping rates due to new emissions regulations taking effect is another change, says Tulloch. By January 2020, most ships in the world will be subject to restrictions on sulphur emissions under a treaty called Marpol Annex VI.
“Basically, ships that previously used crude oil have to switch to a low sulphur oil-based fuel, probably diesel, and this would push up shipping costs for tractor and machinery importers that would need to be passed onto consumers.”
The minimum wage increase is the third challenge facing the sector, says Tulloch. People working in the sector earn more than the minimum wage, but if the lower end of the wage scale increases then all wages need to be reviewed.
“This causes wage inflation. Four or five years ago, a service technician received about $28 an hour, now that’s up to $35. But despite the wage increases, we still have problems with a lack of qualified staff.”
Tulloch says the tractor and farm machinery sector has gotten better at attracting and retaining young people, as well as retaining older and more experienced staff.
“TAMA absolute has a role in this and we need to better promote the exciting career opportunities that exist in our sector.”
Staffing will be one of the main topics at the TAMA inaugural conference, held in Wellington in August.
