In the December 4, 2022 edition of Upstream Ag Insights, Shane Thomas highlighted a couple of interesting comments in the John Deere investor call.
Deere has emphasized that it will be equipping its new tractors and equipment with autonomy and autonomous functionality. However, the equipment upgrade cycle is only so fast. This could limit some of the growth potential and utilization of some of its new capabilities into its huge install base that it currently has. Thomas notes that during the call Brent Norwood, Deere director of investor relations said:
“I think the other thing that’s really important with the rollout of Autonomy is — and this is a little different than what you’ve seen in the past. We will roll out this technology, really retrofit first or field kit first as opposed to most of our technologies which have gone factory installed first.”
Referencing his October 2022 analysis on AGCO and John Deere surrounding retro-fit kits, Thomas noted that as Deere moves further into new revenue models for its business, one area it needs to ensure stays top of mind is its dealer network. Today, the dealer incentives are strongly aligned with Deere’s: sell more equipment, make more revenue. As Deere shifts toward a service based model for some of its “intelligent” capabilities on the tractor, that could lead to misaligned incentives for the OEM and the dealers, Thomas says, leading dealers not to invest in understanding how to sell those enhanced capabilities to the farmer and nor enabling farmers to derive the most value from them. This is being worked out currently by Deere.
During the investor CFO Josh Jepsen said:
“We’ve also made a change to our dealer pay for performance. So we’re including precision ag execution in that pay for performance. And that’s a really important step as we think about continuing to drive the outcomes that we wanted to deliver and really a shift from adoption to utilization to make sure we’re delivering on that and we’re showing and demonstrating the incremental addressable unlock that we can create, which we think is differentiated for Deere.”
John Deere has also reinforced a vision to have entirely autonomous soy and corn cropping systems available by 2030.
You can learn more about the future of autonomous equipment in the ag market in Ag Equipment Intelligence’s just released report — Autonomy Farm Equipment: U.S. Adoption & Outlook.
