David Withers
Unprecedented” seems to be the new normal. You can’t hear a Government Minister speak for more than 2 minutes before the U word is wheeled out (usually as an excuse for their own incompetence!) and certainly there are some issues. The hangover from Covid-19, the BREXIT deal, which has put significant non-tariff barriers in the way of trading with our nearest neighbours, and the war in Ukraine are all causing structural problems.
But the grass keeps growing and the population needs feeding and manufacturers, and dealers are continuing to adapt to the new conditions and challenges. They continue to drive innovation and work hard to help serve our customers more efficiently and ensure that they can provide for the nation’s food needs and make sure our green spaces are maintained and improved.
It has been a busy year for the AEA and in particular the challenges and opportunities that have come from the acquisition of BAGMA (British Agricultural and Garden Machinery Association) have been a real focus for Ruth and her team in Peterborough.
As I write this President’s Report, we are pleased to be in a position to have found a successor for Keith Christian, the long serving and popular Director of BAGMA who stands down after two decades in the role. I think I speak for the whole industry in wanting to thank Keith for his dedication and commitment to the dealers and broader industry, and wish him a very happy retirement. Nick Darking will replace Keith; Nick brings a wealth of experience and knowledge to the Association, having spent 32 years in the industry, and I am sure is the right person to lead BAGMA through the challenges ahead.
One of the many benefits of the AEA acquisition of BAGMA is the ability to talk with stakeholders, and the Government in particular, and being able to represent the entire supply chain rather than just parts of it. Never has it been more important to talk to Government as we move into further regulatory changes and possible divergence from European standards, as well as new technologies in AI, autonomy and the electrification of power sources. So, what might the future hold for manufacturers and dealers in the coming years?
I think the big manufacturers will continue to use their enormous financial muscle and strategic vision to expand their product lines. Either organically or by acquisition. Manufacturers who are long liners will look to become even longer liners and those in the next tier down will look to emulate this goal, and you can see why. The advantages in diluting the costs of selling and marketing over a larger and larger revenue base is attractive. However, it is not just that, it is also the ability to attract and retain the best distribution partners available. By offering such a wide product range that, as long as the partner has the required capital and scale, then it is a win-win for both parties (though possibly, the dealer will make some sacrifice of control).
What about the other manufacturers perhaps not quite as large as the industry giants? We will probably continue to see consolidation which has been happening over many years but off-set by new companies coming into the space. Others will see niche opportunities and be very happy to be niche players. Sometimes the margins available in these areas are significantly better than in more crowded areas. We will continue to see new companies coming in based on the new technologies – autonomous machines – electric machines – intelligent machines but these companies may go on to maturity or may well be snapped up by the existing players.
Dealers have also been consolidating, driven by manufacturers to be bigger and to absorb neighbouring dealers and spread the fixed costs over higher revenues and larger areas. We have seen some of these larger dealers become importers and distributors in their own right and blur the lines between dealing and distributing, I would imagine that this approach will only increase in the future as much of what we do here follows on from what happens in the largest market in the world which is the USA. In the USA, the corporatisation of dealers is further forwards – large venture capital outfits have been buying dealerships and then expanding their operations both geographically and in breadth of line offered. As dealer principals age out and look to retirement the succession plans are not always there for a family member to continue the dynasty. To monetise the going concern rather than simply close and liquidate must become a potential way forward for some dealerships.
There will almost certainly be a divergence of dealers. As some move to being larger and more corporate, possibly with different ownership structures, others will want to stay family owned, with low overheads, not trying to be everything to everybody but specialists in their niche, focused on relationships with their chosen customer base, these can also be very successful in their own spheres. Dealers who started in the 19th century, basically pre internal combustion engine, were often blacksmiths before they became farm equipment dealers and oftentimes did both roles in a town.
20th Century dealers often came out of automotive or at any rate were at heart internal combustion engine specialists and engineers, hydraulics and diesel were core backgrounds. Where will 21st Century dealership start-ups come from?
Will it be spin offs from software developers, mobile phone repairers, AI developers. If in the future products can be diagnosed and fixed remotely, with the key items in the toolbox a laptop and mobile phone connection rather than a spanner and hammer – what does a dealership physically look like? We do not know all the answers, but it is exciting and those companies that embrace the changes will probably succeed in this changing world.
Whatever the future the AEA and BAGMA will be there to support and help our members as we go through this great transition and react to the challenges and opportunities ahead.
I have been so pleased and honoured to be the President of the AEA for this season, following on from so many great people who have held the role since the inception of the AEA in 1875. The AEA is in great shape thanks to an engaged membership, a thoughtful Board, and a dynamic CEO. It has been a privilege to hold this role and I thank Ruth and all the membership for their support during my term.
