When it comes to the acquisition of heavy-duty construction equipment, one important decision that a contractor must make is whether to buy or rent.
Each option has its advantages. If an end user chooses to purchase a machine, it is his to do with as he pleases. There are no restrictions in terms of working hours.
Providing that the contractor has sufficient manpower, it can have its machines toiling around the clock. Moreover, although buying heavy kit is a capital-intensive endeavour, once a unit has served its purpose, it can be resold on the second-hand market.
So why rent? Well, there are several reasons that make the temporary acquisition of machinery and vehicles appealing to contractors. Firstly, there is no requirement for hefty down payments, enabling end users to better manage their cash flow. Moreover, if – for whatever reason – work dries up, the company is not left with expensive machines weighing heavily on its balance sheet.
The deal between National Contracting & Transport Company (NCTC) and GENAVCO offers the best of both worlds. The contractor is currently leasing a pair of heavy-duty Shantui units on a two-year term, with the option to purchase both machines at the end.
NCTC is using a SL60W-2 wheel loader and a SD32D bulldozer at a road-construction project near to Sharjah International Airport in the UAE. For the most part, the Shantui machines are operating at different locations on the same project. Ultimately, the NCTC work teams will meet in the middle.
“We are leasing the Shantui units as part of a two-year deal with the option to buy at the end,” explained Sanaulleh, NCTC’s transport foreman at the Sharjah job site.
“We are approximately one year through this agreement. I work with both machines on a daily basis. In collaboration with GENAVCO, my colleagues and I are involved with their maintenance and operation,” he added.
As Shantui’s authorised UAE dealer, it is GENAVCO’s responsibility to oversee the lease-purchase agreement with NCTC. However, this arrangement extends far beyond the machinery itself. In addition to supplying the wheel loader and the bulldozer, the Dubai-headquartered firm provides operators to ensure that its machines are used safely, efficiently, and effectively.
“The idea behind leasing is to give customers the widest possible range of options,” explained Rizwan Ali Hussain, assistant rental manager at GENAVCO.
“It reduces the financial burden for contractors, allowing them to stagger their repayments and avoid bulk outlays. Clients also benefit through GENAVCO’s trained operators, who help ensure that productivity remains high and that deadlines are met.
“This arrangement is also advantageous from our perspective. At the end of the lease agreement, NCTC might decide that it is not in a position to purchase the machines, meaning that GENAVCO would take them back. By providing our own operators, we ensure that the equipment we lease out remains in good condition,” he added.
Lease-purchase agreements are by no means unheard of, but the one that exists between NCTC and GENAVCO is indicative of a shifting mindset in the Middle East. Historically – and perhaps unfairly – Chinese equipment has perceived as being of lesser quality than that offered by manufacturers from the West, Japan, and South Korea.
This has partly been due to a lack of brand awareness, and partly because of the relative dearth of aftersales support for Chinese kit in the Middle East.
As such, a lease-purchase agreement involving a Chinese manufacturer still represents something of a novelty. In the past, such firms typically offered cheaper machinery in order to persuade contractors to purchase rather than hire.
Nobody could argue that Shantui equipment has lost its price competitiveness, but the fact that a company like NCTC has entered into this deal is a reflection of the manufacturer’s strong reputation for quality and support.
“In the past, we have often encountered the misconception that Chinese machinery is of inferior quality,” explained Hussain.
“However, it’s safe to say that this mindset is changing. The products that are coming out of China – especially those offered by Shantui – are of the highest calibre. This is A-grade equipment,” he said.
Sanaulleh certainly agrees with this assessment. As he explained to PMV, NCTC’s Shantui machines have been working tirelessly at the Sharjah road project, and without incident.
“The Shantui units have been working 10 hours per day on average, and we have not encountered any reliability-related problems so far. We are very pleased with the way that the machines have been performing; they are powerful and reliable,” he added.
When PMV visited the Sharjah project, the SL60W-2 wheel loader was particularly busy. The unit was zipping between a sizeable spoil pile of wet-mix material and a rigid-framed tipper truck, transferring loads from the former to the latter with apparent ease.
This should really come as no surprise. The 20-tonne-class unit boasts a rated power of 175kW at 2,200 rpm and a dump height of 4m. The loader had no problem clearing the truck’s sides when depositing the aggregates.
As Kamil Nadeem, Shantui’s area manager, told PMV, contractors should not confuse the machine’s simplicity with its ability.
“Shantui provides machines that are easy to use and easy to maintain, but they are also adaptable and effective,” he explained.
“As one would expect, the SL60W-2’s primary applications are connected to loading, and this makes it invaluable to road-build projects such as this. The machine can be used to remove excavated material at the beginning of a project, but it is also an excellent tool for the transfer of wet-mix materials, as you have seen today.
“Moreover, this model can be used for simple grading, planing, and lifting applications. It is an extremely versatile machine,” added Nadeem.
In total, NCTC is charged with constructing 3km of internal roads near to Sharjah International Airport. Ultimately, these routes will reduce travelling time for the residents of yet-to-be-built villas, and in turn, will ease congestion on the major highways that surround the site.
As NCTC has just passed the quarter-way mark on its eight-month road build, it will have access to the Shantui units – and GENAVCO operators – for the remainder of the project. However, the contractor has not limited operations to the Sharjah project. When convenient, it is also deploying the machines at other sites.
Based on the feedback provided by Sanaulleh and his colleagues, if NCTC does decide against purchasing the Shantui machines at the end of the two-year term, it will not be because of their quality.
However, even the biggest players are unable to anticipate demand in the longer term; another reason why lease-purchase agreements appeal to so many contractors, according to Nadeem.
“The flexibility that Shantui can offer, in conjunction with GENAVCO, is a real plus point for end users,” he said.
“If a customer is hard-pressed to buy a large machine, the option to pay in monthly installments will clearly appeal to him. Of course, one of the biggest selling points is that at the end of the term, it is the contractor’s decision as to whether he purchases or returns the units.
“This is perfect for clients who are unsure whether or not market demand will warrant heavy-duty machinery a year or two down the line,” concluded Nadeem.
