CNH Industrial, a major player in the agricultural equipment sector, has set ambitious targets to boost its agricultural segment’s operating margins from the current 12.5% in 2024 to a robust 16-17% by 2030. This strategic goal is underpinned by a significant push into precision technology, a domain where the company has historically been more reserved compared to its peers. However, recent developments suggest a shift in CNH’s approach, with precision technology taking center stage in its growth strategy.
CNH has nearly doubled its research and development (R&D) and capital expenditures since 2019, allocating a substantial $924 million budget for R&D in 2024. Of this, a quarter, approximately $230 million, is earmarked for precision technology. This investment is not just about increasing spending; it’s about strategically directing funds towards innovation that can drive operational efficiency and farmer productivity.
The company’s R&D pipeline is robust, supporting over 70 new product launches by the end of 2027. These launches span a wide range of categories, including tractors, combines, crop production tools, and precision technology. This product push is not just about quantity; it’s about quality and relevance, aiming to address the evolving needs of modern agriculture.
Precision technology is a significant revenue driver for CNH. In 2024, precision ag revenue stood at $784 million, accounting for 5.6% of the company’s total revenue. CNH aims to increase this to around 10% of revenue by 2030, which, at flat revenue levels, would translate to approximately $1.5 billion. This growth is not just about increasing market share; it’s about deepening the integration of precision technology into the agricultural value chain.
CNH’s approach to precision technology is increasingly in-house. The company currently builds about 80% of its precision technology stack internally, with plans to increase this to 90% by 2030. This internalization is not just about cost savings; it’s about accelerating integration, enhancing performance, and improving farmer usability. It’s a strategic move that underscores CNH’s commitment to precision technology and its belief in its potential to drive growth.
However, CNH’s strategy is not without its nuances. The company lacks in-house green-on-green technology, relying instead on the ONE Smart Spray joint venture from Bosch and BASF. This reliance suggests a strategic decision, perhaps indicating CNH’s view on the market’s direction regarding advanced green-on-green spraying for herbicides.
Moreover, CNH has reinforced its preference not to pursue recurring revenue models in its precision and autonomy segments. This stance is notable, especially considering the industry’s trend towards subscription-based models. It suggests a strategic choice, perhaps reflecting CNH’s focus on upfront sales and long-term customer relationships.
CNH’s outlook for autonomy by 2030 is also noteworthy. The company’s vision is not for ‘full cycle’ autonomy across an entire cropping system but for autonomous tillage. This outlook is less bullish on full autonomy compared to some competitors, suggesting a more measured approach to this emerging technology.
In essence, CNH’s strategy is a blend of ambition and pragmatism. It’s about investing heavily in precision technology, driving innovation, and deepening integration. It’s about strategic partnerships and measured approaches to emerging technologies. It’s about growth, but it’s also about sustainability and relevance in an ever-evolving agricultural landscape. As CNH navigates this landscape, its precision technology strategy will be a key driver of its success.