Daedong wins $268 mn tractor order from Aral Group

South Korea’s No. 1 agricultural machinery maker Daedong Corp. announced on Tuesday that it signed a deal with Türkiye's Aral Group to supply tractors (20-140 horsepower) worth 350 billion won ($268 million) over five years, from Jan. 2024 to Dec. 2028.

The contract amount corresponds to about 24% of last year's revenue.

According to Daedong, Aral Group, established in 1995, engages in construction and car distribution businesses in Turkey and Azerbaijan.

The group aims to distribute Daedong's Kioti brand products locally, recognizing the bright prospects of the agricultural machinery sector as a future growth engine.

Daedong plans to provide the European Union (EU) Stage V tractors (20-140 horsepower) currently sold in Europe to Aral Group from the first half of next year. Leveraging high price competitiveness and product quality, the company has a goal to quickly penetrate the market and collaborate with Aral Group in various aspects such as marketing, services, and product development.

Through this partnership, Daedong aims to establish a local dealer network of 30-40 outlets within three years and secure a minimum 3% market share. The company plans to sell over 3,000 tractors by 2028.

Türkiye is the world's fourth-largest tractor market, following India, North America, and China. The market has rapidly grown from 54,000 units in 2020 to 68,000 units in 2022, marking an increase of about 25%. Mid-sized tractors in the 61-140 horsepower range account for 70% of the market.

Türkiye's tractor market is highly competitive, with around 20 tractor brands, including local Türkiye manufacturers and multinational agricultural machinery manufacturers from Japan, Europe, and the US. Currently, EU Stage III emissions standards in Europe can be sold locally, but with the stricter Stage V regulations effective from the second half of 2024, changes in the market are anticipated.

In addition to these market dynamics, the Türkiye government is expanding tractor purchase subsidies to replace over 2 million tractors aged 20 years or more as part of the rural modernization project. The subsidy scale is increasing from 24 billion liras ($826 million) in 2021 to 54 billion liras ($1,858 million) this year.

Write to Hyung-Chang Choi at calling@hankyung.com