Challenges Faced by Used Construction Equipment Segment
Despite the good demand and growth of used Construction Equipment (CE) in the country, the challenges faced by the segment in India are no less. Here is a list of all the challenges faced by the used construction equipment segment in India:
1. Market fluctuations: There is no consistency in the demand of used CE owing to the fluctuations in the market, thereby, making capacity planning challenging for the used CE suppliers.
2. Indian market is small, unorganised and fragmented: It goes without saying that still the used CE market in India is very small, highly unorganised, fragmented and mostly dominated by small and regional companies. Thus, in order to be sure of the quality and sellers’ credibility, buyers prefer to purchase a new machine from a reputed seller rather than a used one from a lesser-known company.
3. Limited variety of used CE: Given the limited offerings by the used CE sellers i.e., they keep low to medium value and general purpose equipment like excavators, dozers etc i.e., buyers looking for highly specialised machines have to turn to new equipment only.
4. Availability of lowly-maintained used CE: Since, the sellers in the segment are generally not able to provide well-maintained equipment and trained operators at short notice to the customers, buyers again have to look towards new equipment.
5. Outdated used equipment: It is also believed that the technologically sound equipment are typically not available with the used construction machinery sellers. Hence, this also poses as a challenge for the used construction machinery segment.
6. Poor quality of used CE: The upkeep, maintenance and output of used CE is also one of the major areas of concern as the used CE sellers only focus on short-term maximisation of return and hence, the life of equipment as well as its output is affected in the long run.
7. Lack of professionalism by used CE sellers: Often, lack of professionalism is found in the approach of low-profile used equipment players in the market. As a result, in order to cut costs, they try to make do with their own personnel and cheap replacements of critical spares, which lead to major defaults in the long run.
8. No fixed price for used CE: There is no fixed price for used CE and sellers charge as per their whims and fancies. This also poses as a challenge for the growth of used CE market.
9. Restricted resale of the used equipment: Sale of used equipment is a challenge because the market and network of used CE is not yet fully developed in the country.
10. Other challenges: Last but not the least, used CE need to maintain strategically located branch offices, however, this is something that is seldom seen due to space constraints. This also limits the growth of used CE segment.
A ray of hope
Because of the above mentioned reasons, the used CE segment is not really caught on in India as yet. In fact, the current penetration of used construction machinery in India is quite low and at around 7 to 8 per cent as compared to the global standards of 50 to 80 per cent. However, there is ray of hope ahead as demand for used CE is expected to rise due to large infrastructure and construction projects underway in future. Further, with the customers increasingly seeing value proposition of used equipment, the segment is expected to grow like never before. In fact, if predictions are to be believed, then the used CE segment is expected to show strong growth, possibly higher than 30 per cent annually over the mid- term.