COVID 19 virus lockdown impacted every industry and it also impacted negatively heavy construction equipment industry. All CE manufacturer eyes on better sales figure in the year ending March month. If we leave the March figure most companies fall to zero units in April. Also, this is totally unexpected from the CE manufacturers & those looking for good FY2021 year in financial terms.
Almost all dealers have one-month stocks of equipment. That’s the biggest headache for all of them. Still, they do not have an idea where the market goes. When this construction market fully operational mode?
Let we discuss some of the areas where manufacturers and rental companies can look seriously post lockdown.
Impact on Manufacturer or Dealer
Difficult to survive in this time period. Every dealer has its own operating cost they are recurring in nature whether you run a business or not you have to spend on that. Like salaries of staff, rental exp of office and go down, interest exp.
According to the ICRA construction equipment industry is expected to witness 20% degrowth in the calendar year (CY) 2020. That will impact all manufacturers and dealers in the upcoming year.
Tough Financing and liquidity strain in the market made it difficult for the majority of the dealer to secure funds for customers. Many of the financiers still not open the funding post lockdown because they are also uncertain that what will be the market momentum & how long this pandemic goes on.
Most of the industry person think that fund from the government was weak in upcoming 6 to 8 months but the government reacts in positive against the public thought. The government already approved all highway and railway projects to go further with development. That is a positive sign from the government and that will impact the manufacturer and dealer indirectly.
In the October month emission norm schedule for change on above 50HP construction equipment that rises the equipment costing 5-10% for all companies for that manufacturer needs to be prepared with their OEMs Partners.
All labours left their construction sites this is one of the challenges also but CE manufacturers can see it as an opportunity for them because all compact machines can be used on behalf of the labour. Like Tractor loader, Concrete mixer machine sales can go higher side.
You can see in the below image that in Google trend post lockdown tractor loader or skid steer loader search increases. The same way other equipment demand can increase just we need look into the market.
Local spare parts manufacturers can see the positive side impact in sales figures because all import and export material can see an increase in price, sea, and air freight are uncertain. So there is a strong possibility equipment manufacturers can look for local spare parts manufacturers.
Impact on the rental business
Rental Company who already having range of equipment can see rise in their business. Financier holds on funding almost for new entrants they don’t want to take the risk in this economy trouble scenario.
End-user also doesn’t want to risk their business by taking the new equipment. Better to opt for rental equipment for the meantime at least till the everything does not go normal.
As labour left the construction site some of the equipment can replace the labours. So Rental Company can see some spike in the small construction equipment business. Like, steer skid loader, compact concrete mixer, mini excavators, tractor loader.
As government funding weak in the coming months or year so new projects may get delay. Rental opportunities may lose what they can have. From this segment, rental comapnies can see a downfall in business.
Due to this pandemic, rental companies may get delayed payment for new site work and also those who already done the assigned work that weakens their business working capital. It can impact their business for the long term due to a cash crunch.
Rental companies need to spend more on safety measures earlier they don’t do. Safety items apart from normal routine material rental companies require taking extra safety precautions earlier they avoid it like sanitizer, PPE suits, chemical spreading on equipment.
Used Equipment Market
Used Heavy Equipment market going to increase as we see the situation of the market. All new entrants or end-user don’t want to take the risk of new funding due to uncertain near future and don’t want to spoil there CIBIL ratings. Payment going to delay everywhere will create a financial problem for their business. So that many of the parties move for the used or refurbished machine.
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