The Construction Equipment Rental industry is changing fast, and to stay relevant, rental companies will have to reinvent, consolidate, and find new avenues for growth. This was the focus of discussions at CERA’s virtual workshop on ‘Management of Equipment Rental Business’, held on 24 January 2022.

V. Ravichandran, Founder & Director, Sales Enablers
Experts from the CE Rental Industry discussed business avenues, growth possibilities, and the challenges. Post the Covid-19 pandemic and lockdown, the cost of materials like cement and steel increased tremendously,leading to a cash crunch in the Construction Industry. The result was that equipment rentals grew significantly over equipment purchases, which saw the CE Rental industry grow by a whopping 30%.

“The CE rental industry is emerging strongly, especially since the last 4-5 years. Before that, the penetration of rental equipment in the Indian market was just 5-10%. Today, it has reached nearly 30 percent, said V. Ravichandran, Founder & Director, Sales Enablers, who also advised on how to start a CE rental business and make it profitable.

Arvind Saraf, Head – CERA East Chapter
An important issue discussed at the workshop was on framing robust contracts so that any disputes could be resolved without too many legal hassles. The members present agreed that there should be due diligence and that CERAshould help in framing the contracts. Only clients with a reliable track record should be qualified to sign the contract - a point that needs to be included in thecontract. “A reliable client can be judged by his tax payment regularity, which can be checked on the GST portal,” pointed out Arvind Saraf, Head – CERA East Chapter.

Emphasizing the importance of selecting the right equipment, including the attachments, the experts said that this should be determined by the application requirements and the type of terrains the machine would be working on. Also, the brand of the machine chosen should depend on the type of contract that the rental company plans to enter: if the contract is for the long-term, then the equipment should be long-lasting and highly reliable, which means that the brand should be premium.

The Total Cost of Ownership (TCO) should be taken into account. This would include not only the initial cost, but also the maintenance cost of the equipment, the service and support provided by the manufacturer, and its resale value.

It’s become increasingly important to recruit only trained operators with machines becoming more technologically advanced. Such machines require operators who can learn the controls and operate the machine ably in all kinds of terrains and applications. Plus, the operators should be skilled enough to take care of the health of the machine and troubleshoot when necessary.

Satin Sachdeva, Founder & Secretary General, CERA
“A good operator can ensure fuel savings of almost ₹20,000,” commented Satin Sachdeva, Founder & Secretary General, CERA.“As an automobile engineer, I can very well understand how easy it is for an unskilled operator to damage equipment within just half an hour,” he said.

It was suggested that there should be guidelines for rental companies to follow when buying any equipment. For instance, they should check the undercarriage if buying a tipper, the ropes and pulleys if buying a crane, and so on, along with the overall condition of the machine. Having a recon unit will also help in preventing losses due to unforeseen situations for which the operator could also be trained to handle the recon unit in times of need.

The rental company must ensure a healthy equipmentat all timesthrough regular maintenance and timely inspections, to avoid equipment downtimes of its customers and possible loss of reputation in the market.

The growing importance of advanced technologies in construction equipment was highlighted during the workshop. Features like geofencingwhich alerts the owner if his equipment deviates from its prescribed path; IoT and AI that helps in analyzing data on the behavior, skill,and performance of the operator; and machine monitoring to help saveits idling costs, come pre-installed by the equipment manufacturer, or they can be installed by the rental company owner, if he decides to upgrade his machine.

Advising beginners in the CE rental industry, Arvid Saraf said that going for a long duration project would give them more experience and exposure to the intricacies of the business. He also advised rental companies on the right time to buy an equipment. “Do not buy your equipment during the monsoons as there are lesser projects during the rains, which means that your equipment will lie idle for these three months or so. It is best to buy in the month of January,” he said. He also advised rental companies to look after the basic needs of their operators. “Give them comfortable accommodation and healthy food. A happy manpower will ensure a successful project completion.Staying in touch with clients is also essential since 80% business is given by 20% clients!”

At the end, a Q&A session raised points on rental calculations, return on investment, insurance, and finance.
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