Originally published in the January 2005 Farm Equipment SHOWCASE.

In an exclusive interview with Farm Equipment during Agritechnica, Ulrich Beckschulte, director of Germany’s dealer association in Essen, shared how the dealer world in Germany is quite different from that of North America, but then again, not so different.

Industry Structure — According to Beckschulte, Germany has about 4,000 dealers. That’s a significant number for geography roughly the size of Wisconsin, but then again, Climar, a European association of farm equipment dealers and service companies, states that there are 22,000 dealers throughout Europe. Beckschulte says that Germany’s dealers are small operations, averaging about 9 employees per location.

A striking difference is in the structure of the ‘mainline dealers.” In Germany, only 700 of the 4,000 dealers (known as “A” dealers) work direct with their respective manufacturer. The balance, known as “B” dealers, contracts with the larger “A” dealers, with whom they clear all warranty issues. “One dealer could be an A dealer for SAME, but a B dealer for Case,” says Beckschulte. “The B dealers largely do what they want. Some are venturing into lawn/garden, forestry, municipal and construction work.”

According to Beckschulte, the typical dealer has seen flat revenues over the last three quarters, with a typical margin of less than 1%. He added that the shop rates (What they call “invoice tariffs”) are 40-45 Euro. “There will always be too many dealers who will do the work for 35 Euro,” he says.

Dealership Purity Issues — The dealer purification effort (or what one Agrictechnica exhibitor referred to as “ethnic cleansing”) is not a state-side phenomenon. “Case, Deere and New Holland have the chance to only really influence the A dealers,” he says. “They are not so enthusiastic about other lines, but we support our members in looking outside.”

German Ag Market — “Farms have been falling since the 1960s,“ he says. “We have 400,000 farmers in Germany vs. 700,000 20 years ago. Every day, 50 farmers give up.” This 1-2% annual decline is a sizeable worry for dealers, says Beckschulte, but only half the story. “The remaining farmers aren’t allowed to be real managers; they are restricted in what they can and can’t do,” he says. “They can’t make free choices about their farming operation. And if farmers aren’t investigating the newest practices and technologies, dealers can’t profit.”

“The German market is very small. Dealers must look right and left for their future.” He added that the hobby farmer trend is very much alive in Germany, too, presenting the same opportunities for dealers who want to capitalize on this new customer.

New Niches — “Our members are specialized and educated with high qualifications. We can and should be the first line of expertise and service for all things related to agriculture. Wind, Biomass, other alternative energies, for example. The farmer wants us to be the expert in every technical item that affects his farming business. We say to our members, “If there is anything technical in your surround, you should position yourself to be the expert, to offer the reliable, inexpensive and outstanding after-sales service.” Many dealers have succeeded in servicing the alternative energy fields. The wind market is largely closed now, but dealers should determine what the next opportunity will be. John Deere doesn’t prohibit it, but it is not much help either.”

New Opportunities — Despite the many European businesses hurt by growth of their new Eastern European neighbors, Germany’s dealers are profiting. In fact, Agritechnica has established a used machinery fair, which was very popular with the large numbers of Eastern European visitors, (as many as 20,000 were reported by some) in attendance.

“The growth in Eastern Europe’s ag business has been very important for our dealers, due to the second-hand (used) equipment market. Our members are exporting more and more. They range from the very cheap (Poland) to the very expensive (Czech Republic). It depends on the subsidy program. For instance, the subsidy in Hungary applies only to new equipment. Eastern Europe is very important but not easy because of the language barriers.”

Recruitment — “The education of young staff is so important. We say that once you learn the business and work with our farmers, there’s a good chance you will never be unemployed a day in your life. The technical expertise is wanted in all directions. There is not an unemployed mechanic in all of Germany.” (He hadn’t realized that the Canadian West Equipment Dealers Assn. has been recruiting German mechanics to come to North America.)

Future Trends — Dealer numbers will fall, says Beckschulte, but no more than 2-4% over the next 3 years. “When one large dealer quits, three small ones typically come out. There will, however, be a clearing out of the A dealers.”

More comparison/contrasts of the European dealer market vs. North America will be covered in future issues of Ag Industry Watch.