Sales and Distribution
Agricultural Equipment and Construction Equipment
Agricultural Equipment sells and distributes products through approximately 2,700 full-line dealers and distributors with over 6,600 points of sale. Construction Equipment sells and distributes products through approximately 600 full-line dealers and distributors with over 1,500 points of sale. Agricultural Equipment and Construction Equipment dealers are almost all independently owned and operated. Some Agricultural Equipment dealers also sell construction equipment.
In the United States, Canada, Mexico, most of Western Europe, Brazil and Australia, products are generally distributed directly through the independent dealer network. In the rest of the world, products are initially sold to independent distributors who then resell them to dealers, in order to take advantage of their knowledge of the market and minimize marketing costs.
Consistent with their brand promotion programs, Agricultural Equipment and Construction Equipment generally seek to have dealers sell a full range of products (such as tractors, combines, hay and forage equipment, crop production equipment and parts). Typically, greater market penetration is achieved where each dealer sells the full line of products from only one of the brands. Although appointing dealers to sell more than one brand is not part of the segments’ business model, some joint dealers exist, either for historic reasons or in limited markets where it is not feasible to have a separate dealer for each brand. In some cases, dealerships are operated under common ownership but with separate points of sale for each brand.
In North America and Australia a trade-in of used equipment typically accompanies the sale of new equipment to endusers.
CNH Industrial often provides marketing assistance to its dealers to support the sales of used trade-in equipment through subsidized financing incentives, inventory carrying cost defrayment, or other methodologies.
Exclusive, dedicated dealers generally provide a higher level of market penetration. Some dealers may sell complementary products manufactured by other suppliers in order to complete their product offerings or to satisfy local demand for a particular specialty application or segment.
A strong dealer network with wide geographic coverage is a critical element in the success of Agricultural Equipment and Construction Equipment. The two segments work to enhance their dealer network through the expansion of their product lines and customer services, including enhanced financial services offerings, and an increased focus on dealer support. To assist dealers in building rewarding relationships with their customers, focused customer satisfaction programs have been introduced and they are expected to incorporate customer input into the relevant product development and service delivery processes.
As the equipment rental business becomes a more significant factor in the agricultural equipment and construction equipment markets, Agricultural Equipment and Construction Equipment are continuing to support their dealer network by facilitating sales of equipment to the local, regional and national rental companies through their dealers as well as by encouraging dealers to develop their own rental activities. A strong dealer service network is required to maintain the rental equipment and to help ensure that the equipment remains at peak performance levels both during its life as rental equipment and afterward when resold into the used equipment market. Agricultural Equipment and Construction Equipment have launched several programs to support their dealer service and rental operations, including training, improved dealer standards, financing, and advertising. As the rental market is a capital-intensive sector and sensitive to cyclical variations, Agricultural Equipment and Construction Equipment expand such activities gradually, with special attention to managing the resale of rental units into the used equipment market by its dealers, who can utilize this opportunity to improve their customer base and generate additional parts business.
CNH Industrial believes that it is generally more cost-effective to distribute its agricultural and construction equipment products through independent dealers, although Agricultural Equipment and Construction Equipment maintain a limited number of company-owned dealerships in some markets. As of December 31, 2014, Agricultural Equipment and Construction Equipment operated 3 and 4 company-owned dealerships, respectively, primarily in North America and Europe. The two segments also operate a selective dealer development program in territories with growth potential but underdeveloped representation by the Agricultural Equipment and Construction Equipment brands that typically involve a transfer of ownership to a qualified operator through a buy-out or private investment after a few years.
Commercial Vehicles had 672 dealers globally (of which 20 were directly owned by the segment and 13 were branches), including 299 in Western Europe, 72 in Eastern Europe, 124 in Africa and the Middle East, 69 in Latin America and 108 in the Asia-Pacific region. 502 of those dealers sell trucks and commercial vehicles, 95 sell buses and 75 sell specialty vehicles. All of these dealers sell spare parts for the relevant vehicles. Commercial Vehicles bolsters its distribution strategy by offering incentives to its dealers based on target achievements for sales of new vehicles and parts and providing high quality aftersales services. Through 2,845 sales centers and over 4,700 service centers in over 160 countries, the business can provide support in any geographic area where its vehicles are at work.
A key element of Commercial Vehicles’ growth strategy is its distribution network. In Western Europe, Eastern Europe and Latin America, continued consolidation of the distribution network is aimed at improving service to customers, increasing profitability and reducing overall distribution costs. In Africa and the Middle East, the distribution network is being expanded in order to fully exploit growth in these markets.
In the United Kingdom, the segment is one of the few OEMs that sells trucks and commercial vehicles to companies which offer commercial vehicle rental solutions, such as Ryder, Fraikin and Burntree, among others.
In accordance with European legislation, Commercial Vehicles’ dealers have a specific sales territory. Additionally, European law allows Commercial Vehicles’ dealers to carry multiple brands.
In addition to the Group captive customers, including Agricultural Equipment, Construction Equipment and Commercial Vehicles, Powertrain’s commercial strategy and business model are focused on the development of a portfolio of medium-to-large OEM customers. Powertrain has entered into long-term supply agreements with Claas, Perkins, Komatsu, Tigercat, Merlo, Carraro, LS Mtron, Argo Tractors and Dieci for off-road applications; Daimler-Fuso, VDL, Ford, Tata-Daewoo, Hyundai Motors, Karsan and Xiamen King Long for on-road applications; and Generac, Himoinsa and Greenpower for power generation applications.
Powertrain has a network of 93 dealers and 899 service points in 100 countries that cover its entire product range and related market sectors. Large OEMs use their own internal networks to obtain parts and services for purchased equipment, while small OEMs frequently rely on the Group for delivery of parts and services through Powertrain’s worldwide network.
Pricing and Promotion
The actual retail price of any particular piece of equipment and vehicle is determined by the individual dealer or distributor and generally depends on market conditions, features, options and, potentially, regulatory requirements.
Actual retail sale prices may differ from the manufacturer-suggested list prices. CNH Industrial sells equipment and vehicles to its dealers and distributors at wholesale prices that reflect a discount from the manufacturer-suggested list price. In the ordinary course of business CNH Industrial engages in promotional campaigns that may include price incentives or preferential credit terms with respect to the purchase of certain products in certain areas.
CNH Industrial regularly advertises its products to the community of farmers, builders, transporters and agricultural and construction contractors, as well as to distributors and dealers in each of its major markets. To reach its target audience, CNH Industrial uses a combination of general media, specialized design and trade magazines, the Internet and direct mail. CNH Industrial also regularly participates in major international and national trade shows and engage in co-operative advertising programs with distributors and dealers. The promotion strategy for each brand varies according to its target customers for that brand.
Parts and Services
The quality and timely availability of parts and services are important competitive factors for each of the Group’s businesses, as they are significant elements in overall dealer and customer satisfaction and important considerations in a customer’s original equipment purchase decision. The Group supplies a complete range of parts, many of which are proprietary, to support current products as well as for products sold in the past. In certain markets, the Group also offers personalized aftersales customer assistance programs which provide a wide range of modular and flexible maintenance and repair contracts, as well as warranty extension services, to meet a variety of customers’ needs and to support the vehicle’s value over time. As many of the products sold can have economically productive lives of up to 20 years when properly maintained, each unit sold has the potential to produce a long-term parts and services revenue stream for both the Group and its dealers.
As of December 31, 2014, the Group operated and administered 59 parts depots worldwide, either directly, through a joint venture, or through arrangements with warehouse service providers. This network includes 11 parts depots in NAFTA, 21 in EMEA, 5 in LATAM and 22 in APAC. Each depot may stock parts for one or more of the Group’s segments. The network includes 35 parts depots that support Agricultural Equipment, 26 that support Construction Equipment, 20 that support Commercial Vehicles and 3 that support Powertrain. These depots supply parts to dealers and distributors, which are responsible for sales to retail customers. These parts depots and the segments’ parts delivery systems provide customers with access to substantially all of the parts required to support the products sold.
In December 2009, a 50/50 joint venture, CNH Reman LLC, was formed for full-scale remanufacturing and service operations in the United States. The joint venture primarily remanufactures engine, engine components, driveline, hydraulic, rotating electrical and electronic products. The joint venture is focused on serving the North American agricultural and construction equipment industries. Remanufacturing is a way to support sustainable development and gives customers the opportunity to purchase high quality replacement assemblies and components at reduced prices.
As of December 31, 2014, Commercial Vehicles had over 4,700 service outlets. In addition to Commercial Vehicles standard one-year full vehicle warranty and two-year powertrain warranty, which are extended in certain jurisdictions including the United Kingdom and Germany to match competitors’ practices, Commercial Vehicles offers personalized aftersales customer assistance programs.
As part of a strategy to enter and expand in new markets, the Group is also involved in several commercial and/or manufacturing joint ventures, including the following:
- the Group owns 50% of New Holland HFT Japan Inc. (“HFT”), which distributes its products in Japan. HFT imports and sells the full range of New Holland agricultural equipment;
- in Pakistan, the Group owns 43.2% of Al Ghazi Tractors Ltd., which manufactures and distributes New Holland tractors;
- in Turkey, the Group owns 37.5% of Turk Traktor ve Ziraat Makineleri A.S., which manufactures and distributes various models of both New Holland and Case IH tractors;
- in Mexico, the Group owns 50% of CNH de Mexico S.A. de C.V., which manufactures New Holland agricultural equipment and distributes equipment for all Agricultural Equipment brands through one or more of its whollyowned subsidiaries;
- in China, the Group owns an interest in Naveco, a well-established player in the Chinese light and medium truck and commercial vehicle market. Naveco is a 50/50 Chinese joint-venture of Commercial Vehicles and the Nanjing Automotive Corporation, a subsidiary of the SAIC Group, which designs, produces and sells the Daily model, light and medium vehicles;
- the Group also owns 33.5% of SAIC Iveco Hongyan Commercial Vehicle (SIH), which designs, produces and sells heavy vehicles;
- the Group controls 60% of SAIC Fiat Powertrain Hongyan Ltd (“SFH”), a manufacturing company located in Chongqing: 30% directly through Powertrain, while a 50/50 joint venture between Commercial Vehicles and SAIC group owns 60%. SFH produces diesel engines under license from Powertrain to be sold in the Chinese market (mainly to SIH) and to be exported to Europe, USA and Latin America; and
- in South Africa, Commercial Vehicles owns 60% of Iveco South Africa Works (Pty) Ltd, a joint-venture with the Larimar Group, a leading South African public transport operator and bus manufacturer, operating a new assembly facility for medium and heavy range trucks and buses in Rosslyn, South Africa.