Tractors Finally Get the Tesla Treatment

Source: By Kyle Stock, Bloomberg • Posted: Thursday, August 19, 2021

A crop of electric startups are hitting the $292 billion heavy machinery market just in time for harvest.

Wente Vineyards typically picks its grapes in the late summer and fall, but it harvests its complaints months earlier.

Like most vintners, Wente sprays its grapes with fungicide in the spring. But its vines crawl around a dense patchwork of neighborhoods in Livermore, Calif., about 30 miles east of San Francisco Bay. If Wente crews dust the plants after 6 a.m. on a weekday, they run afoul of laws regulating air quality around schools and daycares. Dust before 6 a.m. and the phone starts ringing with calls from people who prefer a traditional alarm clock to the rumble of a diesel tractor.

“If harvest is the Super Bowl, fungicide season is the playoffs,” says Niki Wente, viticulture manager at the five-generation wine producer.

Next season, however, Wente hopes to be more simpatico with its neighbors thanks to two new electric machines from Monarch Tractor. The 12-foot long vehicles would start crawling the property at four a.m., with their battery-driven motors making about as much noise as a toaster. What’s more, the rigs would drive themselves, so Wente’s field hands can chaperone far from the cloud of fungicide, which tends to irritate skin and eyes.

“It’s really fitting the bill on a number of fronts in terms of making everybody’s lives better,” Wente says.

Monarch electric tractor
Monarch electric tractor

With their battery-driven motors, Monarch’s electric tractors make about as much noise as a toaster. Photographer: Cayce Clifford for Bloomberg Green

Electric vehicle technology has finally arrived in heavy machinery, thanks to battery breakthroughs, a small crop of startups like Monarch and investors hungry for the next new thing on wheels. The future of transportation is about to hit the Heartland.

The tractor market lives and dies on huge machines. Corn, wheat and soybeans comprise roughly half of U.S. farm revenue and those crops are best planted and picked by something called a combine harvester, which looks like a utility shed on wheels and carries a massive rake-like implement that can swallow up to 32 rows of corn at a time. A fully kitted combine fetches low seven figures these days and commercial farming operations seldom hang onto them for more than five seasons, lest they risk a breakdown in the 20 or so days a year that they are running almost nonstop. Climate change is forcing farmers to upgrade more frequently as volatile weather threatens already precious planting and harvesting windows.

The business model at a contemporary tractor company is essentially elephant-hunting. These 25-ton machines are to an outfit like Deere & Co. what jumbo jets are to Boeing or pickups are to Detroit; they largely carry the company. At CNH Industrial, a global conglomerate that makes big machines including tractors, last year roughly one in 10 revenue dollars — some $2.3 billion — came from combines.

“They’re all trying to expand their product offerings and introduce larger, higher horsepower equipment, because that’s where the money is being made,” says Bloomberg Intelligence analyst Chris Ciolino.

But while honking combines is where the big money is, the market is quickly moving downscale. Of the 305,000 tractors bought in North America last year, some 68% were models with less than 40 horsepower, according to Deere. The big rigs, meanwhile, are fallow. The market for tractors over 100 horsepower peaked in 2013. Last year, Americans bought just 6,605 combines.

Tractors and other vehicles in the $292 billion global market for machinery equipment are playing an outsized part in climate change. In the U.S. alone, tractors burn 5.3 billion gallons of fuel a year, according to the Environmental Protection Agency, and agriculture accounts for 10% of the country’s greenhouse gas emissions — about one-third as much as the country’s planes, trains and automobiles. That, increasingly, is creating more incentive to throw R&D money at a small machine with fresh, perhaps fussy technology.

Monarch's 30,000-square-foot facility, not far from the Wente grapes, serves as the company’s headquarters, R&D lab and beta factory.

Monarch’s 30,000-square-foot facility, not far from the Wente grapes, serves as the company’s headquarters, R&D lab and beta factory. Photographer: Cayce Clifford for Bloomberg Green

In a V-neck sweater and jeans, with a face mask pulled over his bicep, and Apple AirPods perched in his ears, Schwager hops on Facetime from the Monarch nerve center. Behind him a massive American flag hangs from the rafters and a crowd of workers carrying laptops swarm one of the company’s first complete machines. It looks, well, like a tractor. The controls are similar to those found on any similar-sized rig and it’s tooled to hook up to most farm implements, from trailers to plows.

“That’s very intentional,” Schwager says. “Farmers are familiar with tractors. We have to fit in the existing farm ecosystem.” The seat, however, is designed to be less than cushy, a subtle nudge to encourage the human to hop off and let the robots do the work.

The rig’s battery — packed into a block rather than a flat, Tesla-style skateboard — is carried up front, counter-balancing the weight of anything hitched to the rear. Monarch declined to disclose the size of its battery, but said it can power about 10 hours of average work, like spraying, or 5 hours of heavier tasks, such as plowing.

Mark Schwager

Mark Schwager Photographer: Cayce Clifford for Bloomberg Green

Monarch has a simple solution to the range-anxiety rife on roads; its machine is engineered to easily swap batteries. With two batteries and a relatively fast charger, Monarch says its rig can run 24/7. The vehicle also doubles as a giant rolling generator, a feature that Ford Motor Co. also is using as a major selling point for its all-new electric pickup.

Cameras on the sides feed a continuous stream of images that inform decisions on where and when to plant. Farmers call this ground truthing. Right now, it requires a hands-on approach and hours of bumpy pickup rides to far-flung corners of an ag empire.

The machine’s brains are wired into the roof, where algorithms process sensor data. When Wente sprays its grapes, for example, the roof of the tractor is steering the rig, aiming the nozzles and adjusting in real-time based on wind and weather.

The only visible hint of the rig’s high-tech guts is an iPad-sized screen bolted to the pillar of the cockpit. While a farmer can fiddle with the old-fashioned levers, a few taps on the touch-screen accomplishes the same tasks and more. Bumping through an orchard, the operator can order spare parts, tweak a charging schedule or decide which recent field photos to upload to shoppers cruising the produce section of a grocery store. “It’s eventually going to be a tool that allows farmers to tell their story,” Monarch cofounder and CEO Praveen Penmetsa explains, “and get more value for their crop.”

An iPad-sized screen bolted to the pillar of the cockpit is the only visible hint of the rig’s high-tech guts.

An iPad-sized screen bolted to the pillar of the cockpit is the only visible hint of the rig’s high-tech guts. Photographer: Cayce Clifford for Bloomberg Green

None of the tractor giants, including CNH and Deere & Company, has rolled out anything like the Monarch. The closest proxy was an electric concept unveiled by Deere on Youtube two years ago that was designed to run while plugged in — a giant spool was attached to the front of the machine to hold 1 kilometer of cable. “It physically had a cord on it,” Ciolino chuckles, “which just goes to show you how far away we still are.”

There is much more to farming than picking corn and wheat. Here are just some of the things people do with a tractor: mowing, discing, tilling, spraying, seeding, pruning, and bush hogging (it’s like clearing, but it sounds cooler). There’s a lot of hauling, of fence-posts or field-hands, you name it. Nearly all of these jobs are best done with a smaller, cheaper machine. “You find a bunch of these in every farm,” Penmetsa said. “It’s the Swiss Army knife of agriculture.”

Praveen Penmetsa

Praveen Penmetsa Photographer: Cayce Clifford for Bloomberg Green

Dave Nuss, who runs a fifth-generation farm in Lodi, Calif., ordered a Monarch about a year ago. He was convinced by his son Tyler, who expects a Monarch or two will replace a few of the 12 diesel rigs they use to grow garlic, tomatoes, peppers and other crops on their 1,000-acre spread and help to reduce their annual diesel bill, which often runs to $150,000. “There’s a pretty compelling financial piece to it,” Nuss said. “Fuel and labor are two of the biggest expenses on a farmer’s balance sheet.”

What’s more, the Nuss clan is focused on regenerative agriculture to supplant fertilizer and chemicals. Disturbing the soil as little as possible is a central tenet of the approach, so the family is hoping to disseminate its field work among smaller, lighter machines.

Not only do modest machines comprise the bulk of the tractor market, they are by far the fastest growing segment. As the pandemic emboldened hobby farmers and accelerated a national chicken-raising craze, sales of small tractors surged 61 percent in the past five years. That means hobby horticulturists now buy roughly two-thirds of farm machines, up from slightly more than half in 2015.

Monarch electric tractor

“That’s very intentional,” Schwager says of his machine, which closely resembles the look of traditional diesel-powered tractors. “Farmers are familiar with tractors. We have to fit in the existing farm ecosystem.” Photographer: Cayce Clifford for Bloomberg Green

As the crowd of affluent, small-scale farmers expands, two other guys are hustling to divert some of the attention away from Monarch. Just north of San Francisco, Steve Heckeroth has spent the past 50 years tooling around his 5 acres, growing delicata squash and trying to get people to shrink their carbon footprint, first by designing off-grid homes and later electric cars. He started tinkering with battery-powered tractors 30 years ago when he realized the immense weight of the power pack wouldn’t be a detriment and, in some cases, would actually be helpful.

“It was like a light bulb coming on,” he recalls. “They’re the ideal electric vehicle.”

Like Monarch, Heckeroth’s Solectrac machines are relatively small and engineered to swap batteries mid-shift. Despite the relatively expensive price tag — specialty models fetch up to $75,000 — demand isn’t a problem.

Solectrac sold its first tractor in 2018 and has about eight in various stages of assembly at its 20,000 square-foot plant. The company hopes to deliver 250 this year, as it chips away at a $1 million backlog in orders. “The typical Midwest farmer is very conservative, so there’s a lot to overcome,” Heckeroth admits, “but there’s a whole new generation of younger farmers just ripe for electric tractors.”

A few miles south, by San Jose, Bakur Kvezereli, a former agriculture minister in his home country of Georgia, is also betting on a crop of young, woke farmers. He named his startup Ztractor, in a nod to generation Z. The golf-cart sized machine looks, roughly, like a Roomba vacuum crossed with a moon rover. There is no cockpit to speak of, let alone a seat; the entire 2,150-pound pod is controlled by a tablet. “It’s so simple,” Kvezereli says. “It’s ‘start,’ ‘stop,’ ‘left,’ ‘right’ – like game-ized farming.”

While the combines trundle on, investors are clamoring aboard these small counterparts. In March, CNH joined a $20 million investment round in Monarch, along with Japan-based auto parts giant Musashi Seimitsu Industry Co.“There’s not going to be a full battery electric crop harvesting tractor coming out in the next decade; the use-case just doesn’t work,” says CNH CEO Scott Wine. “But we’re trying to make sure that in cases like this – with specialty tractors – it can work.”

Monarch electric tractor

The brains of the Monarch tractor are wired into the roof where algorithms process sensor data, adjusting in real-time based on wind and weather. Photographer: Cayce Clifford for Bloomberg Green

Wine reckons that in five years, 20% of small tractors sold will be fully battery-powered, with demand driven by vineyards, orchards and small vegetable crops. “It’s an exciting time in a somewhat sleepy industry,” he says.

Solectrac cashed in as well. Ideanomics Inc., a conglomerate focused on electrification, acquired 21% of the company in the fall and snapped up the remainder in June for $18 million, plus contingencies for another $9 million over the next three years. There’s a new CEO at the helm, so Heckeroth has a bit more time to tend to his broccoli and cauliflower and the lettuce he has planted in the shade of his solar panels.

His favorite part of farming has become the myriad interruptions that come in a day’s field work: hopping down to fix a fence or check the soil. On his Solectrac, Heckeroth often finds himself stretching these nagging chores into a break, a time to catch his breath and listen to the birds. “It’s really wonderful,” he says. “With the diesel, you always feel like you have to keep working, because the noise is still going.”

(Corrects the contribution of greenhouse gas emissions in the U.S. in the 11th paragraph.)