Home / ANALYSIS / Getting flexible: Finance and rent models are influencing the Gulf’s excavator purchases

Getting flexible: Finance and rent models are influencing the Gulf’s excavator purchases

by John Bambridge on Nov 7, 2017

The 20-tonne CX210B is the best-selling model for Case Construction Equipment in the Middle East region.
The 20-tonne CX210B is the best-selling model for Case Construction Equipment in the Middle East region.

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One noticeable trend in the region, and one that is part been driven by the familiar issues of payment delays to contractors and uncertainties over future projects, is the increasing demand for alternative procurement options, including rental and leasing arrangements and financial service that can help mitigate risk for customers in the earthmoving segment.

As Benjamin Zhu, deputy GM for overseas sales at GuangXi LiuGong Machinery, notes: “Because of the drop in oil prices in the Middle East, countries whose economies depend on oil and gas, and especially Algeria and Saudi Arabic, have been postponing existing projects, cancelling new projects, and reducing their budgets for others.

“In this climate, the market conditions in the construction industry have become much more difficult, and ever more customers are opting to rent rather than buy machines.

“While for large excavators, the industry segments of quarry or mining has always presented the greatest opportunity, for medium excavators, more potential is now being seen in second hand machines sales and with the rental business.”

From the perspective of Caterpillar distributor Mohamed Abdulrahman Al Bahar, the excavation and earthmoving product manager, Samir Ismail, notes: “Finance solutions in particular are adding a lot of value for customers, especially when they are able to bundle a range of different machine purchases with one supplier.”

At the same time, he “definitely” sees tightening cash flows driving rental options “for the short term projects”, and Al Bahar itself is encouraging its customers to opt for rent-to-purchase or lease-to-own options.

Like Al Bahar, Moonju Kim, marketing manager for Hyundai Construction Equipment, countries: “We see a growing trend away from the purchase of excavators on their own, and growing momentum towards the purchase of excavators as part of a solution, with packages including options such as financing, maintenance agreements and site or fleet management.

“Fluctuations in the oil prices and tightening cash flows have played a role in the increased demand for longer-term financing and rental or leasing options in the Middle East and across emerging market, though the penetration rate varies.”

At UAE Liebherr distributor GENAVCO, Saif Khan, senior sales manager agrees that the drop in oil prices has driven demand for rental options, but notes payment recovery can be “a big challenge” in the segment. His customers in the emirates are also pushing for extended payment terms and warranties, as well as free annual service contracts.

In addition to growing rental potential, John Boyd, MEA region MD for Kobelco Construction Machinery, concurs that “most customers looking for value-added warranty conditions and finance options”, while adding: “They are also increasingly aware of the value to have fuel efficient machines which will actually make a positive contribution to their bottom line costs.”

For Case Construction Equipment, Franco Invernizzi, senior business director for the region at CNH Industrial, highlights financial solutions accompanied by standard warranty terms and distributor capacity and support as the two key drivers behind customer purchasing decisions in the region.

He adds: “Rental options are certainly on the increase, particularly where the customer has a contractual requirement for the equipment for a year or less, and no further agreed or prospective projects.”