Jan-Hendrik Mohr, CEO CLAAS

Welcome to the Kassenzone podcast this week. A little dream came true for me — I got to drive a tractor, specifically one of the largest in the world, the Xerion from CLAAS. I arranged the deal last year at Hans-Peter Fricke's hundredth birthday celebration for his company, where I met the CEO of CLAAS, Jan-hendrik Mohr. I said I'd love to interview you on the podcast, and he said sure, come to Harsewinkel and you can also drive the Xerion. I did that, and also drove the large — or I think medium-sized — Lexion. I drove over an obstacle course, which was quite fun. I'll send some footage to the Instagram channel instagram.com/supergraf so you can watch me driving tractors. The Xerion has a feature where you can drive crab-steering, a kind of dog-walk mode. The cab can rotate so you can drive backwards while looking forwards. That might be totally irrelevant to most listeners who are wondering what kind of weird feature that is, but in agriculture it's actually a highly sought-after feature. And we're not just talking about agriculture but also a bit about macroeconomics — what do farmer protests actually mean? Is the same thing coming for agriculture as what happened to the solar industry 20 years ago? Are we now selling off our important assets, relocating them abroad, and then eventually getting our food and equipment delivered back from Brazil and China, making ourselves dependent? Or are there smarter strategies? How many tractors can you actually sell? How big is the world market? How many fields are still manually cultivated? How do you sell these things online? What effects did Corona have? The agricultural industry had very strong years in the last two years; currently prices have come back down. You can see this in the fact that Polish farmers are protesting against Ukrainian grain imports. A very exciting topic, an incredibly cool company. I initially got the revenue wrong — I said four billion in the podcast, but they actually do six billion. I took the four billion from a simple Google search, which also shows that Google isn't always up to date on these things. Very successful, very innovative, fascinating production on site. The highlight was of course driving tractors, as it is for every big boy — or most of them, and for girls too. Now let's get into the podcast — enough fanboy talk. Listen to what Jan-hendrik from CLAAS has to tell us.

And I was here on the drive, passing various fields along the autobahn. There was quite a lot of rain. In our e-commerce industry there's always one category that always complains about the weather — the fashion sector. If it's too warm, people don't go to stores; if it rains too much, they don't buy either. We always have this weather discussion. In agriculture, it seems like weather is actually a significant factor. If you look out there at the drizzle — is weather a topic that will be mentioned in the next annual reports, or is the business you do weather-independent?

Okay, let's talk a bit about your products — what you actually sell. In recent weeks during all the demonstrations you could see a lot of CLAAS tractors on the roads. I think tractors — people in Germany have seen those. But now I see a showcase back there with many other devices. What does CLAAS stand for? If I asked my neighbor farmer what CLAAS builds and who builds the best XYZ, what would he say? What does CLAAS stand for?

Which products are those specifically? Which types? If the listeners here don't have an agricultural background, they only know tractors, but I see a combine harvester there too, and I saw quite a few on the drive here. Is that your core product?

And you belong to the top companies in agricultural technology. Some other big names might be familiar — Deutz-Fahr for instance might ring a bell for some listeners. I looked at your numbers in recent years — you've grown quite strongly, but agriculture overall, when you look at it globally, hasn't grown as strongly as you have. Maybe we can look at that separately. How big is actually this agriculture market? Have we already maxed out in Europe — are we already getting everything out of the fields? I mean, I either spoke with you or someone else at the Fricke celebration who said that a large part of the world's fields are still cultivated manually. I couldn't imagine that, but it seems to be the case. What kind of potential are we actually talking about here?

From these 110 to 130 billion — depending on which numbers you take — in annual revenue, how much of that actually refers to tractors? That's what the average citizen perceives as the agricultural machine. How much does the average farmer in Germany spend when buying a new tractor? You have a nice model sitting there on the table.

And then I was talking yesterday with another neighbor who does a lot of contract work and recently had an accident — a truck drove into his tractor. Now he says I need to buy a used tractor. He runs a small contract farming operation, doesn't need such a huge tractor. He's looking in the 120 to 180 horsepower range. I said to him, but there have been so many new tractors sold in recent years — there must be a huge used market. He says no, you can hardly find affordable tractors. They're always 20, 30 thousand euros more expensive than they were five years ago. What's the situation like in this market — is it actually difficult to find affordable used machines, or are new machines also hard to come by? How does the market look right now?

How do you look at the topic of farmers' protests in recent weeks? That's basically an expression of dissatisfaction and also of uncertainty. The diesel issue was what almost pushed things over the edge, but obviously there are several things underneath. There were many well-informed interviews with farmers who said there are simply too many rules, too many things that make agriculture unattractive for the future and make succession extremely difficult. We have very high production standards here but we're essentially regulating ourselves into ruin. There are so many different voices and areas of influence. Some farmers even said we don't really need subsidies anymore. How do you look at that as a company?

And now just a simplified calculation: one hectare of organic wheat versus conventional — what's the yield difference?

That's good to hear — nice advertising for my home region. And how do you observe the land use debate? We had that a lot in the energy podcast — the 'plate or tank' discussion. How are areas actually used? Can you build solar installations on them? We've had the biogas topic over the last twenty years — that's changed massively. And when I listen to what you're saying — that areas for bioproducts are declining a bit — is that really such a huge problem? If a thousand hectares more in Germany get covered with solar panels, maybe with agrivoltaics where you can still run sharp machinery underneath, is that really such a big problem?

But briefly, before we get to your products again — we don't want to forget those. Just briefly on the global perspective regarding climate: I saw a picture yesterday — this year Morocco, last year Morocco — or generally we're seeing stronger desertification of many world regions. Spain already has water problems in the south. Do you notice this in the industry? Is this shifting production, and do we need to produce more in these favored regions because we obviously have enough water here — maybe store it differently so we can irrigate in summer? Is this a topic where you look at global climate change tables and see where production might still be possible and where not?

So climate changes already affect equipment development. I saw in your CV that you have an engineering background and I think grew up on a farm — perhaps... But how close are you to the equipment? When you walk past the Lexion here, or by the Arion 1 — many devices are displayed there. Can you still operate them yourself? Can you contribute and say 'this, that, that's a bit strangely designed — you can't repair that in the field, you should do it a bit differently'?

Ah, exciting. Then let's turn to the biggest machine — or let's say the machine that got the most attention at Agritechnica. So you had this Xerion tractor, or I don't even know if you can still call it a tractor — congratulations on Tractor of the Year, you won that. It was in the hall right after the entrance area. You walk in, and there were one or two — I'm not entirely sure — one on tracks was there. I thought, how huge these machines have become. That's your tractor signature product, the dream of many farmers. Most just don't have operations large enough to use it meaningfully. But there was a lot of admiration for the product at the trade show. I believe you also worked on the first Xerion early in your career, if I remember correctly. But without going too much into this single tractor — is this still a device typically used somewhere in Germany, or is it something that drives on very large fields more in the US? Because on the stand it looks enormous, but when you stand next to the Xerion, it looks small. Where is the journey heading?

How much can you develop yourselves? You're among the top five, but within the very largest you're the smaller one—I think you do roughly 4 billion in revenue. And what you describe, the automation levels or the whole electrical technology in there, even large automotive manufacturers struggle with that—some of which are much, much larger. They have different priorities with their sensors on the road—maybe more is happening there than in the field. But what can you achieve today from here? We're in Harsewinkel—you can reveal that. Where can you shape innovation yourself and say this is our Level 2, our Level 3 is simply maybe better than the competition's? Or do you need to rely on a common platform?

Let's stay with equipment innovation. I understand there's a lot happening with the machines themselves. I paid particular attention at Agritechnica to what's in the area of electrification. If you ask a normal car user what's changed in automotive technology over the last 20 years, they'd say electric motors are coming. It'll take a while to fully take over, but we're probably at about 10% electric share. With tractors, I haven't seen much—I saw a few farm loaders at Agritechnica, some smaller equipment, but not really anything working in the field. During the farmer protests, people often said why don't they put electric motors in there. What I've observed is downsizing—fewer six-cylinder engines, more four-cylinder. But how does it stand—is there even a push for battery technology on tractors? Or does it rather relate to the implements behind, so you don't need a PTO shaft anymore but an electric motor drives the wagon behind it?

And how was the interest at Agritechnica for the electric telehandler? Do the customers say they want it too?

Let me briefly stay with digitalization. What I always observe in the agricultural discussion is that farm management is increasingly being digitized. You have a solution there—FarmNet I believe. But when I think about what farmers actually do in their daily work, would they sit at their computer in the evening entering agricultural numbers, yield data from the wheat harvest, or aggregating weather data? That felt quite remote to me. You're doing this with an interface—for a theorist like me it makes total sense to manage a farm digitally, share data. What's your experience and what's the practical response to such an application?

How big does a farm need to be for this to be applied efficiently? For the part-time farmer with 25 hectares who seems completely overloaded with normal bureaucratic requirements—what he has to document, where he sprayed, what he bought—do farms need to be large enough that they have their own administrative employees to handle this? Or can it still be done alongside?

And is there a big startup culture where startups say, hey, it would be totally cool to build a farm management system? Some data is public—yield data, what you can get from cadastres. Is there an active startup industry around this?

When did you buy this software company? 25 years ago was already very forward-looking.

I'd like to briefly come back to the products. Matthias already told me a bit in our pre-discussion when we talked about how CLAAS actually got into the U.S. That's basically your Jaguar—your core machine with which you also lead worldwide in that product category. I was wondering—can it still exist today? Is there still a product category in agriculture where you can innovate so strongly that people say, okay, we'll give up our tractors, we want everything from CLAAS, they've invented something new that's much better, much more efficient? Does that still exist in classical agriculture, or is it for other growing areas—rice for example, in Asia—where there are still two or three innovation fields. Whoever cracks that is the next billion-dollar market in agriculture.

Let's briefly stay with farmers and market access. We saw it at the Hansa event with Fricke—you have a relatively large partnership approach, because you need these agricultural machinery dealers to reach the customers. And following many classic revenue streams, we've seen strong movement in the last 10 years from B2B2C trade toward direct sales. You have lots of data on the machine that probably has to come together centrally at CLAAS—not every dealer can handle the data. Then there's the classic purchase process for such a machine—what has changed in recent years? Can you already configure a tractor completely online and then you deliver it on a lowboy? Or do I have to go to a dealer?

That means dealers are also experiencing a certain consolidation—they become more specialized, machines get bigger, the small blacksmith operation on-site with two employees can't handle it anymore. Maybe they can sell a machine and deliver it, but during harvest season, repairing a combine and also forging a plow—that requires super specialists who probably first have to learn and understand the diagnostic program to know which sensor it could be. But that also leads to a certain stubbornness in the distribution of market shares. If John Deere says 'I want to give it a bit of gas'—that doesn't just depend on customer interest, they need the dealer infrastructure to service those combines in Schleswig-Holstein. If nobody exists, no customer will buy it. It has to be in sync. Conversely, if you want to achieve market share in the U.S., you need to expand dealer coverage so it becomes relevant for customers. Am I describing that correctly?

And Americans are very proud of Made in America. When 'Made in Germany' arrives, does it still work? Especially farmers might be particularly proud of this 'Made in America'—if a longtime John Deere farmer comes to a farmer meeting with a CLAAS machine, would people look sideways, or would they say cool, I'd actually like that too?

Maybe one last question since we're approaching the end of the podcast. What I noticed at the trade fair—I had expected that where most people live, which is Asia, Southeast Asia, India, China, there would be the most innovation power in agricultural technology unleashed. But I didn't see that much in the machine area. Do we need to be afraid of the next big machine manufacturer from China rolling over the market with cheap machines, as now happening in the automotive sector?

Very cool. I think we could talk for another few hours, but I want to go drive a tractor. I'm looking forward to it. Thank you again for the detailed answers, for the time here on-site. And once more congratulations on Tractor of the Year. Maybe we'll take a look at your exhibition again and other machines. Many thanks.

Alexander, that's it. I hope you enjoyed it. Probably on Sunday there'll be another Energy Zone special episode—let's see how production goes. Then you'll also know how the solar industry in Germany is positioned and whether the resilience bonus really helps. That will be decided on Friday. Many thanks for listening to this podcast and enduring my little fan questions—well, you know what I mean. Bye, have a nice weekend or a nice week, whenever you're listening to this podcast.