Components, lights and shadows of 2023

The sector, which has a countercyclical vocation, has been growing for five years but could slow down in 2023. For the last months of the year manufacturers expect a drop in orders and revenues, due to tensions in the commodity market and the monetary tightening. The weight of the geopolitical variable

The components sector confirms its countercyclical vocation and, unless there are sudden trend reversals, is about to close with growth even in 2023. The expansion phase of this important segment of Italian agricultural mechanics has continued uninterrupted since 2018; more than a decade during which the manufacturers saw the value of production increase by 40%, which in 2022 reached its highest ever with 3.8 billion euros (five years earlier it was 2.7 billion). Moreover, if we also consider the other segments of our agro-mechanical industry - agricultural tractors, incomplete tractors and spare parts, agricultural machinery, gardening machinery - the component sector is the one that, in terms of production, recorded the most significant percentage increases last year, reaching a substantial +15.2%. The manufacturers have therefore managed to capitalize on the favorable economic situation and to counterbalance the known market variables (interruption of distribution chains, boom in raw materials, geopolitical tensions) which, while affecting their performance, have not slowed down demand. The growth in investments in high-tech mechanical vehicles, driven by the transition to agriculture 4.0, and public concessions for the purchase of highly innovative machines, have in fact driven the component market throughout 2022 and in the first months of 2023. According to the findings of Comacomp, the association that represents the component manufacturers within FederUnacoma, the sector's turnover has increased by an average of between 10% and 20%. This increase is due, in part, not to a further growth in demand, but to the fulfillment of those orders that had accumulated in the previous months due to the known difficulties in logistics and supplies.

A cross-cutting sector. The affirmation of Italian components is explained not only by the well-known strengths of Made in Italy — quality, innovation, reliability — but by the “transversality” of a sector that has been able to find commercial outlets even in areas other than that traditionally the prerogative of agricultural mechanics. Today, Italian component companies are not only turning to the composite agricultural world (OEMs, contractors, farmers) but are also looking with interest, and with increasing success, to others. First of all, they are turning to earth moving machinery, which shares a common “terrain” with agricultural mechanics, just think of systems for motoring, hydraulics or transmissions, but also of sectors such as industrial vehicles or robotic applications, which are not so far from the agromechanical sector.

New market trends. New market trends are also contributing to the robust growth of Italian components. The increasingly pronounced digitalization of agricultural machinery and equipment, as well as the growing diffusion of automatic agricultural robots, have prompted many manufacturers to diversify their production, combining traditional mechanical components with a wide range of sophisticated software and hardware systems — from control units to sensors, from touchscreen screens to cameras, to advanced mechatronic devices — which have now become indispensable workmates for farms and contractors. The segment is also driven by a phenomenon that has become increasingly popular in recent years: the “customization” of agricultural machinery. In fact, machines are being customized more and more often, both to be implemented with specific functionalities, which may not be foreseen in models produced in series, and to satisfy the buyer's personal aesthetic taste. In short, today agricultural machinery is not only a work tool, but is also appreciated as design objects.

A 2023 between light and shadow. The first months of 2023, as we emphasized earlier, confirmed the expansive trend seen in past years. Periodically photographing the dynamics of the component sector is the Camacomp “barometer”, a quarterly climate survey conducted among associated companies to test the market's pulse. The surveys conducted last August for the second quarter showed precisely an increase in turnover. For the period between April and June, a significant proportion of the companies surveyed - 39% - reported increases in turnover between a minimum of 3% and a maximum that even exceeded 20%, while for 25% of the sample the business had remained substantially at the same levels as in the first quarter of 2022. From that survey, all in all positive, some areas of shadow emerged.

The most significant of which refers to the trend in orders. In the face of the growth in turnover, however, recorded between April and June, 60% of the companies surveyed also saw a significant drop in orders, which, according to the estimates of the majority of operators (68%), should continue even in the second half of the year. The contraction in demand seems inevitably destined to curb even the turnover, estimated to fall by more than 60% of manufacturers.

A complex scenario. The final part of the year therefore appears to be characterized by great uncertainty, even if the component market could still close the twelve-month period in the black. A lot will depend on the magnitude of the decline expected by the manufacturers. In other words, it will be necessary to evaluate if it will be able to compensate and counterbalance the growth of the beginning of 2023, thus determining a negative balance for the entire components sector: the first from five years to today. From this point of view, not very encouraging signs are coming from the markets and from the broader geopolitical scenario, which in the last 18 months has affected economic variables.

Once the surplus of unfulfilled orders, which drove the growth of the first and second quarters, has been eliminated, the companies in the sector are operating in a context still characterized by strong international tensions (exacerbated by the new conflict in the Middle East) and by continuing inflationary pressures on the raw materials market. Once again, the cost of energy commodities is “special observation”, which is very sensitive to international policy variables. But on short and medium-term trends, the monetary tightening of the US and European central banks is also beginning to be felt, which is holding back the propensity to invest even in the agro-mechanical sector.

To further complicate the picture, the progressive exhaustion of public benefits and those factors of a cyclical nature - from the price of foodstuffs to that of inputs for agriculture, to the trend in agricultural incomes - that affect the spending capacity of companies and farmers. In short, the variables at stake are so complex and numerous as to hold back even a market segment as countercyclical as components.