What kind of growth do you envisage for the Crane Rental market of India?
Restrictions due to the government enforced lockdown during the pandemic hampered the manufacturing and construction sector globally. Shortage of raw materials and adequate labour led to suspension or shut down of construction projects, impacting the market revenues of crane rental service providers. Restrictions on international trade also slowed demand for cranes from the logistics sector.
But now the market is coming back to normal. Mobile/Crawler cranes account for the largest share in the crane rental market due to their application across various industries. Plus, there are numerous ongoing and upcoming projects in the pipeline; these include development of ‘smart cities’ across the country, rise in mining activities and power resource development, construction of infrastructure such as railways and metros, highways, airports, and residential and commercial buildings and for their advantages such as mobility, fast installation and setup time - which are expected to fuel increased usage of mobile cranes in the rental market.
The market is seeing an increasing requirement for all-terrain cranes for use in the construction of various industries, including the end-use industries (for loading, unloading, lifting jobs like maintenance etc). Their requirement has also gone up dramatically in the construction of high-rises. These cranes are chosen over conventional lifting and construction equipment due to their versatility.
How do you see the economic feasibility and sustainability of the crane rental business over the long-term?
Purchasing new cranes entails heavy down payments, which diverts a large amount of a company’s capital from its key operating expenses. The crane rental market players such as construction contractors and manufacturers must also bear additional expenses for storage of the cranes and their spare parts, interest on the loan amount taken for buying a crane, licensing, insurance, and taxation on the new machines. What’s more, crane rental services have the advantage of providing advanced equipment without incurring these additional costs. So, rental companies will always be relevant in the market due to their low capital Investment and high output.
What are the challenges?
The rental business was supposed to be a simple concept: rent or lease out an asset for a fixed or a recurring amount that customers will pay on schedule. Right? However, this is not true: there is a lot of competition in the rental business, and to stay ahead in the market, rental companies need to update themselves on the latest equipment and also upgrade their equipment to meet market requirements and demand.
In the rental business, margins may be strained, and demand can be erratic and unmanageable if not monitored well. Steel prices are at an all-time high due to steep increase in the price of iron ore and strong steel demand. BSIV norms have also hit the crane rental business.
Seasonal and economic fluctuations can make it quite difficult for a company that has financed an expensive equipment, to obtain the optimal value of the purchase, particularly if the equipment is idling during slow months of business. There’s also the matter of keeping up-to-date with the latest models and technologies.
What are the issues that need to be addressed collectively by rental associations, big rental companies, and the OEMs?
Cranes are an expensive purchase and expensive to maintain. Regular maintenance is necessary as any mechanical failure could lead to accidents. There’s also the issue of hiring licensed/trained operators who have the technical know-how and can operate the machine safely.
Crane rental rates are driven by competing crane companies in your service area. Of course, you are going to have that one company that comes in and bids low to get the job. But usually, customers realize that they are getting what they have to pay for: because a good price doesn’t always equal good service.
Competition can be challenging in both good and bad ways: it drives crane rental rates down and also opens up opportunities for operators to find jobs at a higher salary. Rental associations should set a standard rate as per a crane’s capacity/ tonnage, while the OEMs should ensure prompt service, maintenance, timely availability of spares, warranty extensions etc, and also help rental companies in challenging times (like the current pandemic). This will go a long way in helping rental companies to sustain their business and grow as demand escalates.