South Korean agricultural machinery company TYM confirmed that it terminated its original design manufacturer (ODM) contract with India’s Mahindra in December last year. TYM had overseen the entire process from tractor development to parts procurement and production, while Mahindra branded and sold these products.
Concerns have arisen that the waning popularity of its mainstay product, compact tractors, in the North American market, coupled with the termination of its contract with Mahindra, a significant contributor to sales, may hinder TYM’s business growth in the United States.
“The contract ended according to Mahindra’s internal strategy,” a TYM staffer on April 3 said. “We are still providing after-sales service such as parts replacement, and there is still a possibility for partnership in the future.”
The U.S. is a major market for TYM, accounting for about 65% of its sales. Last year, 540 billion won out of 836.5 billion won in sales came from the U.S. The company revealed that the sales contributions from its own brand (direct exports) and ODM in the U.S. market are roughly equal, with a ratio of about 50:50. TYM has ODM contracts with other companies besides Mahindra but did not disclose Mahindra’s sales proportion in its ODM business.
In January last year, TYM’s North American subsidiary, TYM-USA, was newly launched as an integrated North American corporation, TYM North America. It followed the integration of the North American brand “Branson” from its subsidiary, Kukje Machinery, which underwent a merger and absorption in 2022.
TYM has been expanding the production capacity of its Georgia plant to increase its market share in North America. The plant only had a partial assembly line that assembled parts sourced from South Korea. With the expansion, it will now have a full assembly production line capable of manufacturing core parts locally. The expansion was expected to be completed in the second half of this year but is likely to be delayed.
“In the North American market, which heavily relied on ODM, we plan to increase our own brand’s production and sales centered around the integrated corporation,” said the TYM staffer. TYM has been diversifying its products, including launching new medium to large tractors since the second half of last year. The selling price of medium to large tractors is three to five times higher than that of compact tractors. During the coronavirus pandemic, there was a significant increase in demand for compact tractors in North America as more people took up farming as a hobby, but now the demand has decreased again. According to the Korea Customs Service, the export value of compact tractors dropped 34% from $796.57 million in 2022 to $521.82 million last year.
