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AGCO Inks MOU with Alibaba to Tap Chinese Rural Market

AGCO CorporationAGCO signed a memorandum of understanding (MOU) with Alibaba Group Holding Limited BABA to boost product offerings in the Chinese rural market. Per the deal, the company will offer superior machinery to promote modern agricultural practices in the country.

The MOU was signed by Gary Collar, General Manager of Asia Pacific and Senior Vice President of AGCO, and Frank Yu, Senior Director of Alibaba Group's Rural Taobao business division, in the presence of Fred Yang, Vice President and Managing Director of AGCO China.

China has a huge agricultural machinery market in addition to the favorable government policies and an enormous labor force. In Mar 2015, China's State Council launched the 'Made in China 2025' program. The Chinese government also declared that the agricultural machinery industry will be highlighted under its "intelligent manufacturing program."

Also recently the Chinese government stated that it will prioritize investment in agriculture and rural areas, develop pilot financing and rental projects for large agricultural machinery, encourage agricultural machinery leasing, and support reforms in the rural financing system.

The recent MOU is in sync with the government policy for the development of the country's agricultural sector. Per the agreement, AGCO will make its full product line of farm equipment available to farmers through Rural Taobao's online platform cun.taobao.com.

Simultaneously, both the parties agreed to extend their cooperation to cloud computing and Big Data apart from rural finance and other areas. The deal will promote the development of "modern agriculture" and "intelligent agriculture" in the country, thus elevating the productivity and standard of living in the rural areas.

Notably, AGCO's China strategy includes growing domestic sales and market share by providing complete solutions, leveraging global technology and resources to produce high quality and competitive machinery.

Even though the demand for high-end agricultural machinery products in China is high, supply is considerably low. AGCO is strengthening its dealer performance and stepping up investments to cash in on this opportunity.

In this regard, AGCO recently opened a manufacturing base in Changzhou which will also solidify its presence in the Asia-Pacific region. In addition, the site will enhance R&D and manufacturing capacity of the company in China.

The 200,000-square-meter site will serve both domestic as well as export markets. With the new facility, the agricultural equipment manufacturer and distributor aims to steadily reach an annual capacity of 20,000 tractors, 30,000 engines and 40,000 rear axles and transmissions.

AGCO's business is growing steadily in China, from a provider of product sales and after-sales services to a total solution provider for Chinese farmers. The company now operates four key brands in the country - Massey Ferguson, Valtra, Dafeng King, and GSI - and consistently launches premium, medium and high-end products.

Though the devaluation of yuan and recent turmoil in the Chinese market have been a cause of concern, the geographical advantage and governmental support are likely to boost AGCO's long-term growth.

AGCO is a global leader focused on the design, manufacture and distribution of agricultural machinery. The Duluth, GA-based company supports productive farming through a full line of tractors, combines, hay tools, sprayers, forage equipment, tillage, implements, grain storage and protein production systems, as well as related replacement parts.

AGCO currently sports a Zacks Rank #1 (Strong Buy). A couple of well-ranked stocks in the same sector are Titan International Inc. TWI and ACCO Brands Corporation ACCO , both with a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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