A Long Way To Success
Gomselmash increases export via joint ventures and assembly facilities abroad
Gomselmash increases export via joint ventures
and assembly facilities abroad
Most governments provide support to the domestic agribusiness. This pertains, first of all, to the production of sophisticated and expensive machines, like grain harvesters and forage harvesters. It is no secret that the preference is given to machines produced domestically. Therefore, the industry leaders set up joint ventures or assembly facilities abroad to boost sales.
Gomselmash ramped up the production of grain harvesters in 2001. To make the production profitable, the company had to explore new markets outside Belarus. The established export schemes, mainly barter trade, did not allow for large-scale and regular supplies. Therefore, the export of one of Belarus’ industrial giants in 2005 was as little as $35 million.
The company studied the export practices of the market leaders – John Deere, Claas, and New Holland – and decided to set up joint ventures in other countries. Over the five years the company’s solutions and technologies have been introduced in Russia, Kazakhstan, China, Ukraine, and Argentina.
The company’s efforts have borne fruit. In 2011 the export rose to $285 million.
Be Neighbors with Neighbors
We gave the 2005 figures for a reason. It was back then when Gomselmash registered its first joint venture abroad. It was established in Bryansk Oblast, the Russian region that borders on Gomel Oblast. Gomel Oblast and Bryansk Oblast are not only good neighbors. The regions have a common history and interpersonal ties.
The joint venture Bryanskselmash was remarkably viable and fast-growing. A small distance between the parent company and the daughter enterprise, no language barriers, common engineering traditions stemming from the Soviet times, and, the main thing, mutual benefits allowed to arrange the assembly facility of Belarusian
harvesters in Bryansk within a short period of time. The beginnings of the joint venture were quite humble. It made only several dozens of machines per year. However, the production volume was rising year to year, with models becoming more complicated.
Today Bryanskselmash is capable of producing virtually all types of machines designed by Gomel engineers. The joint venture has made a name and became the second largest producer of grain and forage harvesters in Russia after Rostselmash. Over the last two years, the company has been producing hundreds of machines. Bryanskmade Polesie harvesters are now used all over Russia. According to the recent information, they are operated in over 50 regions of the Russian Federation.
The sales explosion can be attributed to several factors: a well-organized dealer network of Gomselmash in Russia, good maintenance service and an exceptional reliability of Belarusian machines. For example, Polesie GS12 combine harvester has been recognized the CIS best machine in the segment. Therefore, it is no surprise that the machine dominates the order intake of the joint venture.
Bryansk was the first station on the Great Harvester Way eastward.
New Old Friend
Kazakhstan became the second most important strategic partner for Gomselmash. The decision made perfect economic sense. First, Kazakhstan is a major grain producer. Its annual demand for new harvesters is estimated at 1,000 machines. Second, the country has set up a number of major industrial companies that forfeited their market positions after the collapse of the USSR, but retained a great infrastructure. Third, being a major exporter of oil, gas and other raw materials, Kazakhstan is capable of providing considerable support to the national agriculture.
Gomselmash expanded into the Kazakh market in 2007. By that time the local market had been divided between large foreign companies. The Belarusian producer teamed up with Agromashholding to implement a promising project. In 2008, Kostanai Engine Plant owned by Agromashholding assembled the first batch of grain harvesters (54 units). Polesie GS812 is the prototype of the harvester known in Kazakhstan as KZS-740 ESSIL. This is a 4th class harvester designed for fields with the grain yield of up to 40 centners per hectare. In fact, it is perfectly suited for Kazakhstan conditions. The harvesters have been fitted with 7-meter-cutters. The pilot batch of harvesters did very well during the first grain harvesting campaign. Today it is one of the most popular machines in Kazakhstan. About 400 harvesters were sold in 2011.
The partners deserve credit, too. They worked hard to promote bilateral cooperation. For example, last year they started to assemble selfpropelled forage harvester KSK-600 and grain harvesters Polesie GS12, which is known in Kazakhstan as KZR-760 ESSIL.
No one doubts that the assembly plant in Kazakhstan has great prospects. The country has launched a
long-term program to develop the livestock industry which needs a significant technological upgrade. This year the joint venture is set to assemble at least 50 units of forage harvesting equipment. I have already mentioned the prestige of Polesie GS12 in Kazakhstan. I just want to add that this is the most popular grain harvester in the CIS.
Harvesters in Kostanai are assembled in accordance with the license contract that provides for the use of mostly locally-produced spare parts and mechanisms. This form of industrial integration allows the Belarusian producer to have certain preferences in the form of lower customs duties, exemption from VAT in sale and leasing schemes.
When Gomselmash just arrived in Kazakhstan, it announced it was planning to take over 50% of the local market of new combine harvesters. Four years ago it seemed like something almost fantastical. However, almost 500 units were sold last year. The assembly facility aims to produce as many machines in 2012.
Of course, well-known manufacturers from the United States, Germany, the Netherlands and Russia continue to operate in Kazakhstan. Some of them do well in sales, others do not. But all of them had to squeeze up with the arrival of the Belarusian producer in Kazakhstan. As they say in these cases: nothing personal, just business.
However, companies compete almost everywhere, including in China. This is the market Gomselmash targets next.
An agreement to set up the Belarusian-chinese joint venture “Harbin Dong Jing Gomel Plant of Agricultural Engineering” in the city of Harbin (Heilongjiang) was signed in September 2009. Its founders were Gomselmash and Dong Jin Group (China).
In December the same year, the enterprise received the status of a legal entity and was put on the register of business entities of China. Construction of production premises was fast. In a short while they commissioned ten frame cranes, and made a conveyor to assemble machines from kits.
Simultaneously, training of specialists was underway. Orders for the manufacture of spare parts that were included in the localization nomenclature list were placed with enterprises of China. In the spring of 2010, Gomselmash sent the first trains with kits for forage harvester KSK-600 “Polesie FS60”. The outcome of such prompt move is the following: 100 units of equipment will be ready by the beginning of the forage harvesting season.
It seemed that the next step of the joint venture would be to increase the production capacity, improve technological process, and establish maintenance centers for the new harvesters. But the enterprise decided to start producing ear corn harvesters.
Gomselmash had not previously produced this kind of equipment. Specialists had only six months to design the first pilot model and launch tests. In Belarus the selfpropelled four-rowed ear corn harvester is known as KPS-4 (4YZQ-4) harvester. Tests were completed in November. In December the production program was approved, and the manufacturing was launched. In March 2011 Gomselmash shipped kits for new equipment to China. In August the first combine harvesters rolled off the assembly line. All in all it took the plant 15 months. By the harvesting campaign the joint venture sold over 300 combine harvesters. The significance of this figure can be illustrated by the following fact. Another joint venture to manufacture similar equipment was set up in Harbin in association with John Deere Company. The American company took five years to reach such sales. Gomselmash has been able to do so in one year.
Such a detailed account of progress in the production of ear corn harvesters shows how difficult it is to work abroad. It is competition that sets the pace. They say opportunity only knocks once. It is no less important to think about prospects, improve the technological process, and expand presence on the market, i.e. to plan and create future.
In Autumn 2011 upgraded ear corn harvesters KPS-4-1 were tested in Belarus and China. The new machine has a number of fundamental differences; it is less metal intensive and more reliable. This year the company is planning to launch mass production of this
equipment. Moreover, Gomselmash is keen to export potato and beet harvesters to China. Negotiations and promo campaigns were held in neighboring provinces. In all likelihood, Inner Mongolia and Beijing will purchase the equipment produced by the joint venture this year. There are plans to sell 500 combine harvesters in 2012.
Of course, not everything is smooth for Gomselmash on the Chinese market. First, this is a great distance from Gomel to China, which increases transport costs. Second, there is a language barrier. The Chinese corporation hired many interpreters to work with Belarusian specialists. Third, the competition on the market is much bigger than, for example, in Russia or Kazakhstan. Fourth, the Belarusian producer has to spend a lot on training local personnel, opening maintenance centers, and marketing services. Therefore, the project will not bring huge profits in the short-term perspective.
Nevertheless, the founders of the joint enterprise believe that in five years the sales of corn harvesters may reach 5,000 items, the sales of forage harvesters can amount to 300 items. That is a tenfold increase. Is that feasible? If we compare these targets with the sales growth numbers in Kazakhstan within five years we will get virtually the same figures.
Eastward promotion of Belarusian technologies did not stop with China. In August 2011 Gomselmash exported the first batch of forage equipment to South Korea. The company exported seven pull-type forage harvesters KDP-3000 Polesie FT40. The harvesters are used to crop full and wax ripe corn, sorgo, sunflowers, and other tallstalked plants with further grinding and loading on transport vehicles.
Korean specialists needed to test harvesters coupled with energy intensive tractors. Fields are rather small in Korea. That is why local specialists decided to test the following scheme: they mounted a KDP3000 in front of a tractor and placed a cart for crushed corn behind it.
The Belarusian harvesters proved efficient. Therefore, there are plans to cooperate further this year. By the way, German pull-type harvesters underwent similar tests. As a result, the choice was made in favor of Belarusian-made equipment.
Why has Gomselmash decided to expand eastward while Europe is much closer? It appears that things are not so easy in the world of business. It is worth saying that practically all Gomselmash machines are compliant with the EU standards. Thus the company can export harvesters to Western countries. Moreover, Belarus-made combine harvesters received good reviews from farmers after tests.
But there is such a thing as protection of local producers. Farmers in the European Union can get subsidies only for the purchase of the equipment made in Europe. In addition, the recent financial crises have affected the financial capacities of many countries. As a result, local agrarians will not buy Belarusian equipment because they will not receive subsidies from the government although Gomselmash tractors are much cheaper than West European analogues.
Production of farm machines will get a greater focus in Belarus, President of the Republic of Belarus Alexander Lukashenko said as he visited agrotown Alexandria where new Gomselmash machines are operated. August 2011
KZS-1624 Polesie GS16 is the most
powerful grain harvester in the CIS
Highly efficient fodder harvesters Polesie FS80 in the field