GCC contractors are shifting their mindset towards hiring rather than buying construction equipment and vehicles, say some of the industries’ leading suppliers.
Representatives from Volvo, ASCON, Atlas Copco and a plant manager at ASCON told an audience at the Construction Week Conference that a changing project market that will see shorter bursts of construction activity has caused a region used to buying its equipment to look for shorter term loans.
“For the sake of mobilisation, and when looking at the duration of a project, rental is perhaps better in terms of capital investment,” said Michael Sagerman, general manager at Atlas Copco. “This shift [to rental from purchase] is not quick but is slowly coming. If you compare the western world to here, in the west there is about 80-90% rental. Here it is about 80-90% purchase.”
He added that in a downturn, companies focus more on their core business with the issue “how to execute their core knowledge”. This also will spur a greater demand to rent.
David Semple, general manager of Manitowoc, said that the duration of project was a critical factor. He added that suppliers will inevitably have the latest technology and developments, meaning contractors will always know they can rent the best equipment rather than have to constantly upgrade their own fleets. PB Ahmed Mohideen at ASCON added that contractors should also rent if they do not have the sufficient maintenance team.
Dragon Krznaric at Volvo said that there are three key areas to consider regarding hiring versus rental. “Firstly there are the market dynamics: when you’re coming out of recession there might be a greater use of existing equipment. Secondly, the length of the project: if it is a short-term project they will more likely hire equipment. Thirdly, the market attitude – people here like to own their equipment.”
The panel added that there had been a “flight to quality” for equipment as opposed to choosing equipment simply based on price. Semple added that this was partly down to the changing role of the distributor: in the past your distributor would be local and can speak the same language. Now, in a global market, there is more competition and the future of the market will come down to quality.
