Analysis of the special equipment rental market in India
The relevance of research
Special equipment is a complex technical vehicle, machines, mechanisms that have a clearly defined purpose, are developed taking into account the specifics of the scope of application to perform specific tasks and speed up the production of work, resulting in an increase in efficiency and a general increase in the efficiency of the entire production process
Purpose of the study
Analyzing the state of the special equipment rental market in India, assessing the market size, analyzing competitors, as well as determining the factors affecting the special equipment rental market
Content
Part 1. An Overview of the Indian Vehicle Rental Market
1.1. Definition and Characteristics of the Indian Construction Equipment Rental Market
1.2. Volume dynamics of Indian construction equipment rental market, 2017-2021
1.3. Market structure by type of service provided in India
1.4. Structure of the special equipment rental market by Union Territories
1.5. Assessment of current trends and development prospects of the studied market
1.6. Assessment of factors affecting the market
1.7. Analysis of sectoral indicators of financial and economic activity
Part 2: Competitive Analysis of the Indian Construction Equipment Rental Market
2.1. Major players in the market
2.2. Market shares of the largest competitors
2.3. Profiles of major players
Part 3. Analysis of consumption of special equipment rental
3.1. Estimation of consumption of special equipment rental per capita
3.2. Market Saturation and Estimated Market Potential in India
3.3. Description of consumer preferences
3.4. Price analysis
Part 4. Assessment of factors of investment attractiveness of the market
Part 5. Forecast for the development of the rental market for special equipment until 2026
Part 6. Conclusions on the prospects of creating enterprises in the study area and recommendations for current market operators
Research excerpt
Part 1. An Overview of the Indian Vehicle Rental Market
1.1. Definition and Characteristics of the Indian Construction Equipment Rental Market
Special equipment is a complex technical vehicle, machines, mechanisms that have a clearly defined purpose, are developed taking into account the specifics of the scope of application to perform specific tasks and speed up work, resulting in an increase in efficiency and a general increase in the efficiency of the entire production process. It is also called special equipment or specialized.
In India, the rental market for special equipment is represented by a huge variety of offers. Every year this field of activity is developing: the number of special equipment is growing significantly and new options for obtaining services appear.
The development of this industry is most facilitated by the construction of roads and the construction of low-rise buildings. Due to the difficult economic situation, construction companies are striving to reduce risks. By renting equipment, you can get a quick result from its work with minimal investment and not worry about its maintenance, further repair and maintenance.
A huge range of special equipment implies the presence of a fairly wide and branched classification. The most clear and understandable is the distinction between special equipment for the performance of a certain type of work and services.
The most common types of special equipment:
- construction special equipment;
- road cars;
- communal;
- agricultural;
- used in logging operations;
- mine and exploration.
...
1.2. Volume dynamics of Indian construction equipment rental market, 2017-2021
For 2017-2021 volume of the Indian special equipment rental market increased by ...%.
...
Diagram 1. Dynamics of the volume of the rental market for special equipment, 2017-2021, billion Rs.
A number of companies significantly reduced their activity in March. 2022 Rental companies with high leverage began to significantly reduce prices.
1.3. Market structure by type of service provided in India
According to the federal Internet portal ""Perevozka 24"", in the structure of demand in the rental market of special equipment, vacuum trucks and sludge pumps are leading by type with a share of ...%, ...
The structure of the sentence is distributed somewhat differently. The largest number of offers for the rental of special equipment is noted ...
1.4. Structure of the special equipment rental market by Union Territories
Competition in the special equipment rental market also largely depends on the geography of the business. For example, in Central India - its northwestern and southwestern parts - mainly small companies provide equipment for rent. This is because in these latitudes the climate is mild and the requirements for equipment are slightly different - the ability to work on equipment of non-premium brands, which is much cheaper.
The situation is different in the Urals, Siberia and the Far East, where in winter the temperature can drop to “minus” 40°C and below. Under such conditions, small companies with poorly developed services do not survive. When servicing expensive machines, special tools are required, technological rooms with special equipment for diagnostics and repairs, as well as a staff of qualified specialists, so well-equipped large companies compete here.
...
1.5. Assessment of current trends and development prospects of the studied market
Currently, experts identify the following trends in the development of the special equipment rental market:
...
Also, there are a number of problems in the rental market of special equipment for a long time:
...
Obviously, the special equipment market in India in 2022, most likely, will not experience a particularly noticeable rise. However, productive and efficient enterprises will certainly be able to increase their share in the service segment under consideration due to high-quality work, constant updating and improvement of the existing fleet of special equipment, as well as using modern business methods, including using the Internet.
The most competitive will be those enterprises that offer potential customers the widest range of services related to rental. This applies equally to special equipment produced by both domestic and foreign companies. Of course, imported equipment is much more diverse, and in some respects, much more efficient and productive than Indian.
...
Among the prospects in the rental market of special equipment, replenishment and partial replacement of parks with domestic special equipment is expected.
1.6. Assessment of factors affecting the market
Consider the main factors affecting the market and, accordingly, demand.
India GDP
GDP is a macroeconomic indicator that reflects the market value of all final goods and services produced in a year in all sectors of the economy on the territory of the state for consumption, export and accumulation. The dynamics of India's GDP is decisive in the vector of development of the entire economy of the country and determines the key trends in consumer effective demand and economic activity.
...
- Социальные
Real income of the population
...
Rental of special equipment is becoming more and more preferable. The crisis and, as a result, the increase in prices for special equipment, only made the choice even more obvious in favor of rent.
Population
The current demographic situation in India is characterized by natural population decline (since 2017), which is accelerating, and migration growth, which does not compensate for natural decline.
...
- technological
Instant rental
In June 2022, the Phaedon app appeared in the AppStore and Play Market, a unique aggregator of its kind that allows, according to the creators, to order construction equipment in 15 seconds and at a fixed cost.
The project is currently working only and not all types of special equipment are available in it. The most popular and proven category is the manipulator, which can be ordered not only for a shift, but also for a flight, having previously calculated the cost of transporting a specific cargo.
...
According to the creators of the service, the main advantage of the application is the cost. Dynamic pricing algorithms take into account the ups and downs of seasonal demand, the proximity of the contractor, customer rating, the number of free equipment and much more.
Digital Insurance
Absolut Insurance and the TRANSBZA digital platform have created a new insurance product - digital insurance for the rental of construction machinery, tools and equipment.
Absolut Insurance and TRANSBZA have replaced outdated insurance schemes with an innovative streaming insurance model for rental transactions – all transactions carried out through the platform are automatically insured, and the insurance premium is included in the rental price. At the same time, the actual grid of insurance rates, depending on the type of insured equipment, amounts to ...% of the rental rate.
...
Import substitution
Against the backdrop of the departure of foreign manufacturers of special equipment from the Indian market, Rostec presented at Innoprom a product line made entirely from domestic components. In Jul. 2022 in Yekaterinburg, they showed both loaders, excavators, pipelayers and other machines that have already proven themselves, capable of solving a wide range of tasks in public utilities and agriculture, as well as new products that are ready for serial launch.
...
- Political
Development of the construction industry
In India, there is a national project ""Housing and urban environment"". It includes:
...
The result of 2021 is a little paradoxical - with a sharp increase in prices for building materials, a drop in incomes of the population, massive complaints from construction companies about a shortage of personnel and pandemic restrictions, the volume of completed squares broke records.
Chart 9. Number of completed residential areas in India, 2017-2021, mln sq. m
The government also pays attention to the construction of roads.
...
Consequences of NWO
Many owners of equipment, especially imported ones, are thinking about the further maintenance of their fleets. In light of the current situation, there are problems with a shortage of components, scheduled maintenance, etc. Work is actively underway on the possible use and supply of components from alternative manufacturers.
The main problems of the spare parts market are the search for new supply partners and the difficulty of building new supply chains, since imported products are mainly shipped in containers, and global container companies refuse to ship goods to India due to possible reputational risks.
At the same time, almost none of the owners of equipment purchased spare parts directly from a foreign manufacturer. Therefore, the solution of this issue primarily lies with large wholesale companies that have the necessary connections, resources and experience for the prompt organization of supplies from alternative channels.
...
Concluding the assessment of the factors influencing the rental market of special equipment, we will summarize the key ones in the framework of the STEP-analysis.
Table 2. STEP-analysis of factors affecting the rental market of special equipment
According to the results of the performed STEP-analysis, macro-environment factors have a positive effect of weak force on the development of the special equipment rental market.
The active development of the construction industry, the fall in household incomes, as well as a number of technological factors – digital insurance, instant rent, import substitution – have a positive impact on the market.
Among the most negative factors on the market are: the consequences of the SVO, which are expressed in problems with the shipment of spare parts for imported special equipment; exchange rate instability and population decline.
1.7. Analysis of sectoral indicators of financial and economic activity
Financial and economic indicators of transport and logistics services were calculated by GidMarket analysts according to Rosstat, taking into account OKVED: (77.31) Rent and leasing of agricultural machinery and equipment and (77.32) Rent and leasing of construction machinery and equipment.
Gross margin shows how much gross profit falls on a unit of revenue. It serves as an assessment of the economic efficiency of the enterprise, which reflects the rational use of labor, material, monetary and other resources.
According to experts, only large companies with a wide range of vehicles in their fleet can count on high profitability in the business of renting special equipment.
...
Current liquidity characterizes the extent to which all short-term liabilities of the enterprise are secured by current assets. Shows how many rupees of current assets account for a unit of short-term liabilities.
The estimated indicator of current liquidity of a normally operating solvent legal entity must be at least one, that is, it is necessary that the total value of current assets be greater than the amount of short-term liabilities.
...
A more stringent liquidity criterion is the absolute liquidity ratio. It shows what part of short-term liabilities can be repaid immediately, if necessary, at the expense of available cash and marketable securities.
...
Business activity is the ability of an enterprise, based on the results of its economic activity, to take a stable position in a competitive market, it is the performance of an enterprise in relation to the amount of resource consumption in the process of the operating cycle.
Indicators of business activity are related to the rate of turnover of funds: the faster the turnover, the less semi-fixed costs per turnover, which means the higher the financial efficiency of the enterprise and the industry as a whole as an aggregate of many enterprises.
Diagram 12. Business activity (average term of receivables turnover) in the field of rental of special equipment, for 2017-1 quarter 2022, days days
The stability of the financial position of the enterprise is impossible without effective management of working capital, based on the identification of significant factors and measures to provide the enterprise with its own working capital.
The equity ratio characterizes the availability of own working capital of the enterprise, necessary for its financial stability, it is calculated to assess the solvency of the enterprise.
The absence of own working capital, that is, the negative value of the coefficient, indicates that all the working capital of the organization and, possibly, part of the non-current assets are formed from borrowed sources.
...
In general, the analysis of sectoral financial ratios in the field of special equipment rental shows low values of profitability and absolute liquidity. At the same time, the industry has sufficient funds that can be directed to the development of enterprises.
Part 2: Competitive Analysis of the Indian Construction Equipment Rental Market
2.1. Major players in the market
The rental market of construction equipment in India is characterized by a low level of concentration (a large number of operators with relatively small market shares, the Herfindahl-Hirschman index HHI < 1000 is a low-concentration market). Mergers and acquisitions are allowed freely.
Competitive analysis of the special equipment rental market is complicated by the weak presence of companies on the Internet. During the analysis, not all legal entities were able to find and determine the actual belonging to the market. Thus, in determining the largest competitors, an error is possible.
...
2.2. Market shares of the largest competitors
As of 2021, the largest operator in the rental market of special equipment in India has become ...
It should be noted that the companies provide not only rental services for special equipment, but also advise on the choice of machines and mechanisms to solve the tasks.
2.3. Profiles of major players
XXX
...
XXX
...
XXX
...
XXX
...
Part 3. Analysis of consumption of special equipment rental
3.1. Estimation of consumption of special equipment rental per capita
The volume of consumption of special equipment rental services per capita is calculated by GidMarket based on the total population of India.
...
Diagram 16. Consumption of special equipment rental per capita, 2017-2021, Rs./person
3.2. Market Saturation and Estimated Market Potential in India
In terms of life cycle, the rental market for special equipment is in a growth stage.
This is evidenced by:
- growth in consumption in monetary terms per capita;
- growth of market volume in monetary terms;
- The growth potential of the market remains quite high.
Market competition is intensifying. Pricing is becoming one of the ways to compete.
The main task of marketing at this stage is its maximum extension, which is achieved by using all sources of growth and building entry barriers for new players.
The promotion strategy should form a high commitment to the service, as well as an increase in the frequency of use.
...
The size of the market for rental of special equipment in India is negligible.
It should be noted that certain schemes for the supply of special equipment for leasing are subsidized by state programs, which also serves as an additional development factor.
Thus, the potential market capacity is quite high. However, its achievement will be held back by the still felt effects of the pandemic and the daily changing geopolitical situation.
3.3. Description of consumer preferences
Evaluation of potential customer groups that may be interested in the services of a company that provides special equipment for rent largely depends on the specifics of a particular region or city. However, based on Indian practice, the main customers for renting special equipment can be:
...
Important consumer preferences when choosing a company are:
- observance of terms of maintenance;
- clearly fixed price;
- no visible damage;
- special equipment must be modern, productive, so that the rental efficiency is high;
- Availability of imported equipment.
3.4. Price analysis
In general, in India in 2017–Jun. 2022 price indices for special equipment rental services have been steadily increasing. The maximum increase in the cost of services in the study period was noted in the first half of 2022 ...%.
Table 11. Consumer price indices in the special equipment rental market in India in 2017-Jun. 2022, %
The cost of services for renting special equipment depends on the type of special equipment, load capacity, operating weight and other technical indicators. The price is calculated based on the number of shifts and hours.
...
Diagram 18. The cost of renting special equipment, Aug. 2022, Rs./hour
Part 4. Assessment of factors of investment attractiveness of the market
...
The positive factors of the investment climate in the special equipment rental market dominate over the negative ones.
- The most significant positive factors:
- ...
- The most significant negative factors include:
- ...
Part 5. Forecast for the development of the rental market for special equipment until 2026
The external environment for the Indian economy remains challenging and significantly limits economic activity.
The main feature of the current economic situation is that supply is shrinking more than demand. This is what creates the main inflationary pressure. The colossal uncertainty of the situation is expressed in an increased amount of risks for the forecast.
...
The following factors also make it possible to predict the dynamics of the volume of the special equipment rental market:
- Market trends and prospects;
- Strengthening the position of industry leaders;
- Growth in the construction of roads and buildings;
- Development of instant rent;
- Import substitution policy.
...
Part 6. Conclusions on the prospects of creating enterprises in the study area and recommendations for current market operators
...
Macro-environment factors have a positive impact on the development of the special equipment rental market. The active development of the construction industry, the fall in household incomes, as well as a number of technological factors – digital insurance, instant rent, import substitution – have a positive impact on the market.
...
For both new and existing operators of the special equipment rental market, we recommend:
...
Diagrams
Diagram 1. Dynamics of the volume of the rental market for special equipment, 2017-2021, billion Rs.
Diagram 2. Structure of the special equipment rental market by types (by demand), Aug. 2022, %
Diagram 3. Structure of the special equipment rental market by type (by offer), Aug. 2022, %
Diagram 4. Structure of the rental of special equipment in India by Union Territories, 2021, %
Chart 5. Dynamics of India's GDP, 2013–Jun. 2022, % to the previous year
Chart 6. Monthly dynamics of the US dollar against the rupee, 2017-Aug. 2022, Rs. for 1 US dollar
Diagram 7. Dynamics of real incomes of the population of India, 2013–Jun. 2022, %
Diagram 8. Population dynamics in India, as of 01 Jan. 2013–2022, million people
Chart 9. Number of completed residential areas in India, 2017-2021, mln sq. m
Chart 10. Profitability before tax (profit of the reporting period) in the field of rental of special equipment in comparison with all sectors of the Indian economy, 2017-1 quarter. 2022, %
Diagram 11. Current liquidity (total coverage) in the field of rental of special equipment for 2017-1 quarter 2022, times
Diagram 12. Business activity (average term of receivables turnover) in the field of rental of special equipment, for 2017-1 quarter 2022, days days
Chart 13. Financial sustainability (capacity) in the rental of special equipment, in comparison with all sectors of the Indian economy, 2017-1 quarter. 2022, %
Chart 14. Shares of the largest competitors in the special equipment rental market in 2021, %
Diagram 15. Dynamics of the total revenue of the largest operators of the special equipment rental market (TOP-5) in India, 2017-2021, million Rs.
Diagram 16. Consumption of special equipment rental per capita, 2017-2021, Rs./person
Diagram 17. Stage of the life cycle of the rental market of special equipment
Diagram 18. The cost of renting special equipment, Aug. 2022, Rs./hour
Diagram 19. Forecast of the volume of the rental market for special equipment in 2022-2026, billion Rs.
Tables
Table 1. Expert forecasts for the decline in real GDP in India in 2022, %
Table 2. STEP-analysis of factors affecting the rental market of special equipment
Table 3. Gross margin of the construction equipment rental industry compared to all industries in India, 2017-Q1 2022, %
Table 4. Absolute liquidity in the construction equipment rental industry compared to all sectors of the Indian economy, 2017-Q1 2022, times
Table 5. Main companies participating in the rental market of special equipment in 2021
Table 6. Basic information about participant No. 1 of the special equipment rental market
Table 7. Basic information about participant No. 2 of the special equipment rental market
Table 8. Basic information about participant No. 3 of the special equipment rental market
Table 9. Basic information about participant No. 4 of the special equipment rental market
Table 10. Basic information about participant No. 5 of the special equipment rental market
Table 11. Consumer price indices in the special equipment rental market in India in 2017-Jun. 2022, %
Table 12. Average prices in the rental market for special equipment by Union Territories, Aug. 2022, Rs./hour
Table 13. Assessment of factors of investment attractiveness of the special equipment rental market
Table 14. Forecast indicators of the development of the Indian economy
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