Homegrown agricultural machinery manufacturers flex their muscle in European countries

Chinese agricultural machinery companies are making their presence felt in Europe as they move to expand their global footprint.

Last month, the State-owned YTO Group Corp, China's largest farm machinery company, completed the acquisition of McCormick, a French farm machinery factory owned by the Italian Agro Group, for 8 million euros.

In 2008, Changzhou Dongfeng Agricultural Machinery Group, from East China's Jiangsu province, spent $8 million (5.64 million euros) to buy a German company, with a factory in Poland, producing chains. It recently started producing farm equipment from the Polish factory.

The deal by the YTO Group, also known as China First Tractor, has paved the way for the company's expansion into Europe's agricultural machinery market.

The renamed YTO France SAS hopes to produce 11,000 transmissions and 5,000 tractors for the European market. The Chinese group has an annual revenue of 14.8 billion yuan (1.6 billion euros)

Zhou Liqun, manager of Changzhou Dongfeng's import and export department, says that the importance of teaming up with Western companies is not only about brand recognition, but also enhancing the technological prowess that has hobbled their export prospects.

Zhou says it has been exporting small-powered farm equipment such as compact tractors and mowers because Chinese companies have an advantage in that particular field.

"Our price of small-powered farm machines is much lower than those in Western countries," Zhou says.

"The global downturn that decreased consuming power offers Chinese farm machinery makers a chance to compete in global market with its low-cost machines and parts.

"Besides, they are simpler and easier to repair."

Zhou says that for more powerful machines, Western brands are still preferred because "they have better quality and can offer better after-sale service".

The company has been exporting its products to Southeast Asia and Africa for about 40 years, and to North America and Europe for 10 years. Last year, its exports were worth more than $60 million, accounting for more than 20 percent of its sales.

Up to now, China's farm equipment companies have been producing small and underpowered machines, attractive to only developing markets in Southeast Asia and Africa.

Exports of China's farm machinery amounted to $6.57 billion last year, a growth of 30 percent year-on-year, according to China National Association for Agricultural Machinery Industry.

The association said China's farm machinery sector did well last year, thanks to a government plan that subsidizes the purchase of farm machinery. A total of 15.5 billion yuan of subsidies were handed out from January to October last year.

The industry registered an estimated profit of 15.5 billion yuan, a jump of 20 percent year-on-year.