Satin Sachdeva, Founder & Secretary General, Construction Equipment Rental Association (CERA)
India’s construction equipment rental industry is progressing, albeit not too well. Though various market and research agencies project that India’s rental market will grow at a CAGR of 5.1 percent in the period 2020-25, the market scenario for rentals is not too encouraging, despite the increasing focus of the government on infrastructure development.
In the past few years, the rental industry has witnessed two things: rising cost of equipment, operations, and manpower, and reducing rental rates. This is in addition to the problem of delays in payment recoveries.
What the rental industry is ignoring for a long time is the issue of over-supply of equipments in the market which has in fact disrupted the balance of demand and supply. Market sources have indicated that more than two-thirds of construction equipments sold in the market have been purchased by the rental industry, which is good for the growth of rental industry, but this has created an imbalance and affected rental rates.
Buying has come done in the past few months as the market is reaching a saturation point owing to the already aggressive selling by equipment manufacturers, which has created an oversupply of equipment in the market, and which is further disrupting the rental industry business.
According to iCEMA (Indian Construction Equipment Manufacturers Association), the sale of construction equipment has registered a month on month decline of 7% during May 2022 as compared to 2021.
Though we have always focussed on building a relationship of mutual cooperation and interest with the OEMs, but it seems that it is not working as affectively as expected by the rental industry players. Consequently, both the industries are suffering.
The CE industry, including the rental industry, cannot survive in a detrimental business environment. We should, therefore, collectively find a solution soon, because if the rental market does not balance itself, the rental rates will not stabilize and consequently both the rental companies and the OEMs will see business declining. If the situation is allowed to go on like this, the rental industry will be forced to impose a moratorium on buying new equipment and will prefer to work more with used equipments.
If all the stakeholders react positively and through cooperation, we will be able to find a favourable solution for both the CE industry segments. Already, voices are being heard in the industry declaring a self-imposed moratorium on buying new equipment until the rental market reaches a balance. Deliberations on achieving balance have also started in the rental industry and CERA will be organizing a conference to address this issue of demand and supply, which is affecting rental rates, and find appropriate solutions.
It is time to come together and reset the equilibrium.