Statement from, and attributable to, Kubota Tractor Corporation 4.20.23
In response to your recent article, “Kubota to pull back on tractors, Looks more at CE,” Kubota Tractor Corporation would like to offer some additional context to clear up any confusion created by the article. Kubota is not reducing its commitment to manufacturing and selling its full line of high-quality tractors. In context, the quotes from KBT senior management communicated that the company has developed fiscally conservative plans for 2023 to normalize our production volume, returning to 2019 levels. While that is technically a reduction in production, it doesn’t consider important context about our ongoing commitment to our tractor line. Conversely, the CE market remains strong, and we are placing more emphasis on increasing inventories that are currently well below desired levels. We remain committed to right-sizing supply chain needs to meet demand across all areas of our business.
During Kubota's FY22 earnings call, Executive Vice President and Representative Director, General Manager of Planning and Controlling Headquarters Masato Yoshikawa said that along with the company’s growing North American CE business, there are plans to pull back slightly on the tractor side. He added that Kubota had struggled with its production of mowers and UTVs specifically.
“As I have mentioned before, over the past 2 years we have run out of store inventories of mowers, utility vehicles and construction equipment in response to intense demand, and replenishment of these inventories will account for a sizable portion of our sales this year,” said Yoshikawa. “We are not planning to increase the number of tractors, but rather, we want to slightly reduce the number of tractors. However, production has not gone well, especially for U.S.-produced products such as mowers or utility vehicles, and in a sense, dealer inventories have been reduced to an extreme degree in the last year and the year before.
“In addition, most of the construction equipment is Japanese products, but we were not able to supply this as well due to the Shanghai lockdowns. In FY2019, retail sales of construction equipment were just under 25,000 units, but this figure increased to slightly less than 38,000 units last year. On the other hand, dealer inventories have decreased from 11,800 units to less than 4,000 units. Just to restore this extremely reduced inventory, we expect to see a considerable increase in sales this year, and since we have also factored in price increases, we hope you will understand that will lead to an increase in sales.”
Kubota executives forecast continued growth of the company’s construction revenue in North America, commenting on the short supplies dealers have seen in this segment and steps they’ve taken to address it.
“The end of last year, of course, saw the largest growth in the construction equipment market. For the construction equipment, we expect retail sales of mini backhoes to increase by more than 100% and wholesale sales will be probably like 120%,” said Kubota President and Representative Director Yuichi Kitao. “In particular, CTL and other products were in extremely short supply, with dealers having only 0.6 months of inventory at the end of last year. The dealerships are expecting a full-swing recovery. In addition to the more than 100% growth, wholesale is expected to grow by 120% for mini backhoes and 130% for CTL.
“Residential, on the other hand, will certainly return to some extent though slightly, due to the recession. Our current view is that we should plan to return to 2019 levels. Among them, with regard to RTV, dealer inventory should normally be a minimum of 4 months for residential products, or about 6 months in standard terms, but at the end of last year, it was 1.2 months. This means that parts supply was short on the management side and production was not possible. We have also set up a two-shift production system at the plant and are now in the process of increasing production.”
Compact Track Loader Sales
Kubota representatives stated the company’s compact track loader (CTL) business had grown to account for 50% of its construction equipment business in North America. Kitao categorized the company’s North American construction business as a “medium-term growth driver” and said both sales and market share for its compact track loader buisness have grown steadily.
Kubota Wholesales of North America Compact Track Loaders — 2010-22
Source: Kubota“Last year, we transferred the production of some models from Japan to the U.S., increasing total CTL production capacity and shortening lead time,” Kitao said during the earnings call. “We are also working to update the competitiveness of our products through full model changes.
“Meanwhile, on the development side, the North American construction equipment engineering department, which was established in 2021, is leading the development of new CTL models and smart attachments such as agricultural machine-linked implements. We aim to expand our product lineup and increase our market share through integrated local management of development, production and sales.”
