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Tier IV Confusion & Concern

Dave Kanicki Editorial

After interviewing each of the major manufacturers for the February article, “Not All Tier IV Engines are Created Equal,” p. 38-44, we heard from a dealer friend who was confused and concerned about the new Tier IV engines that are mandatory in 2011 on all off-road diesel engines over 174 horsepower.

He’d heard that Deere might switch to SCR (Selective Catalytic Reduction) — the engine technology that AGCO is adopting across the board, and Case IH and New Holland will utilize it for their medium and heavy-duty engines — after investing heavily in EGR (Exhaust Gas Recirculation). Cummins also has committed to 

EGR. He asked what we knew about it.

While each say they’re staying the current course, don’t be surprised if all the engine makers adopt some form of SCR technology as the fuel efficiencies and other advantages it offers may be too attractive to ignore.

He also asked about the higher price that will come with the new engines.

“Has anyone considered the ‘tax’ this puts on farmers as we’re told that the Final Tier IV will add 5-15% on the INVOICE price?” he asked. “New Holland has also told their dealers this and they’re asking for a bunch of orders to beat the deadline.”

There’s no doubt that EGR and SCR will increase the price of new farm equipment. How much and how it will influence purchasing decisions are the more pressing questions for dealers.

One manufacturer that Farm Equipment interviewed acknowledged off the record that, depending on the machine, Tier IV regulations would add about 2-4%, or about $7,000-$8,000 to customer invoices in 2011.

Two of the manufacturers we spoke with say they’re going to tie as many value-added options to the new tractors as possible to justify the additional costs created by Tier IV.

After attending a farm meeting in Chicago in January, Ann Duignan, machinery analyst for JP Morgan, said, “Most farmers that we spoke with said they will either pre-buy in 2010 or skip the next few years altogether. One farmer said his dealer told him that tractor prices would be up $20,000 in 2011.

“We expect some pre-buying in 2010 and a significant drop in industry sales into 2011 as a result,” she says.

If my past experience tells me anything, it’s that her projections have some basis in fact.

Much of my working career was spent working in or closely following the auto and trucking industries. Whenever new environmental regulations were introduced that required new engine technologies, buyers rushed to buy new equipment prior to the technology deadlines. This was then followed by a year or more of soft sales as purchases had been pulled forward and most buyers let others “go first” and try it out.

When you add fears of higher prices to an ingrained suspicion of new technology, you get reluctant customers. At least part of this behavior is the result of some trying to “scare” up sales this year at the expense of next year’s.

To counteract this, it’s been suggested that manufacturers may be willing to take a hit on margins in 2011 in order to help farmers get over concerns about the new engine technology and higher prices. They would look to improve margins with more dramatic price hikes the following year.

So what’s it all mean to you? It means you need to talk to your supplier to understand their plans. Then start educating your customers about what’s coming. Communication has a way of allaying confusion and concern.

Posted March 9, 2010

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Posted from: Kelly, 3/16/10 at 4:48 PM CDT
I was reading the article about the SCR engines being more efficient than EGR engines and the claims that SCR engines deliver more power at a lower cost. The same day I read results from the latest Nebraska Test where the John Deere 8320R tractor with EGR broke another record for the most fuel-efficient large row-crop tractor ever tested. Also in a "head to head" with the AGCO/Massey Ferguson tractor with SCR, the Deere EGR tractor had anywhere from a 4-8% advantage cost efficiency advantage, when Nebraska compared the cost of diesel used in the EGR engine vs. the cost of diesel and urea in the SCR engine. In the articles that appeared in Farm Equipment (Not All Tier IV Engines are Created Equal, February 2010, p. 38-44) and Ag Equipment Intelligence (New Engines, Pricing Concerns Could Impact 2011 Tractor Sales, March 2010), AGCO claims the Nebraska tests confirm their SCR engine produces 4-16% fuel savings than the competition. I wonder what test that was? 1. Nebraska OECD Tractor Test 1963 Summary 660 2. Nebraska OECD Tractor Test 1936 Summary 611 3. Nebraska OECD Tractor Test 1937 Summary 612 4. Nebraska OECD Tractor Test 2499 Summaries 655, 659, 651 The 8320R set a record as the most fuel-efficient large row-crop tractor ever to be tested at the NTTL delivering 18.93 hp-hr/gal (226 g/ while producing 274.37 PTO hp in the Rated Engine Speed Power Take-Off test, beating the record previously held by the 8430. The AGCO tractors consumed more diesel per horsepower than the 8320R. In addition to burning more diesel, the AGCO models also consumed DEF, which John Deere tractors do not require. The 8320R also set a record as the most fuel-efficient row-crop tractor ever to be tested at the NTTL in the 75% of Max Power at Reduced Engine Speed Drawbar test, delivering 17.84 hp-hr/gal (240 g/ while producing 186.66 drawbar hp, beating the record previously held by the John Deere 8400. To me it seems impossible that both can claim they have the best efficiency! Kelly Mathison, Marketing Manager, Ag. Division, Enns Brothers, Brandon, Manitoba

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