Overall German tractor registrations were up 20% year-over-year in June 2019. Low-horsepower (<100 hp) tractor registrations were up 17%. High-horsepower tractor registrations (100 hp+) were up 23%, with tractors in the above-150 hp category up 21% and in the midrange(100-150 hp) up 26%. Sequentially, overall tractors increased 21% with a 4% improvement in the low-horsepower category and a 35% surge in high-horsepower. Year-to-date, German tractors were up 21% with low-hp up 40% and high-hp up 11%. The June monthly sales were split between 39% low-horsepower tractors and 61% higher-horsepower tractors, which are consistent with normal seasonality. Recall for 2018, total German tractors were down 18% following an 18% increase for full year 2017. European tractor registrations in 2018 were distorted by an increase of registrations in late 2017. Production, however, which is more important than registrations, was more normal.
U.K. tractors decreased 1% year-over-year in June. Year-to-date, U.K. tractors were down 3%. Recall for 2018, total U.K. tractors were up 1% following a 14% increase for full year 2017. William Blair Equity Research believes there was some pull-forward of U.K. tractor demand earlier in the year led by OEMs who wanted to have inventory ahead of continued Brexit concerns.
Deere and AGCO are guiding the European market to be flat in 2019. The European Ag Business Sentiment (CEMA) peaked in February last year and has trended lower since then. The index dropped below 20.0 in May and the deterioration accelerated in June. Overall, there are mixed signals among European countries, but we believe the market as a whole is fairly stable. Historically, the ups and downs in Europe have not been as volatile as other markets in part due to subsidies that provide stability. The forecasts of the European industry remain positive based on CEMA’s survey. Changes in business sentiment moving forward will probably depend on countries that continue to have optimism, like France, Spain, Italy, and, to a lesser degree, Austria and Switzerland. On average, the CEMA survey participants still expect an increase by 3% in 2019.
