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European economic slowdown affects forklift buyers


Wednesday, 1 Aug 2012 ( #576 )
News Story
Jungheinrich UK recently renovated its used forklift showroom facility in Erdington, Birmingham.
Companies have in the past supplemented their forklift fleets using short-term rentals during peak seasons, while some businesses just prefer second-hand to new trucks. However, as Christine Cranney reports, forklift suppliers are noticing a definite growth in short-term rentals and used truck purchases, as the economy slows in Europe.

Statistics by global market researcher RedShift indicate that around 10% of forklifts currently operating in Europe have been supplied on a short-term rental contract.

Neil Warren, used equipment and short-term rental director at Jungheinrich UK Ltd, believes that the market growth represents a trend that may soon rival long-term contract rental and outright truck purchase as a preferred method of truck acquisition.

"The upturn in the number of trucks entering the market on short-term deals is being driven, in part, by the harsh economic situation." Warren adds that while short-term contracts have traditionally been perceived as being more expensive than more traditional truck acquisition methods, there is a strong economic and strategic business case for taking the short-term option.

"Many forklift users now see short-term forklift rental as something more strategic, rather than a stop-gap measure. As a result, short-term rental has become part of the business model for many truck users.

"A growing part of our business is from minimal-term contracts. When compared to standard fixed-term rental contracts of, say, five years, they represent excellent value for money. In particular, we have seen a notable uptake in this type of contract in the manufacturing sector – where, thanks to the volatile economy, flexibility is key," he says.

To cope with increased demand for short-term rental trucks, Jungheinrich has invested over GBP5 million (USD7.8 million) in its short-term rental fleet over the past 12 months.

The company’s UK fleet now exceeds 2,000 units, and includes models from Jungheinrich’s full range of warehouse and counterbalance trucks, as well as rough-terrain vehicles supplied by Manitou.

Warren says the type of company that looks to the second-hand market for its materials handling needs has also changed dramatically in recent years because of the difficult economic trading conditions.

"Customers are now very open-minded about buying used equipment, and there is little or no difference in the type of company that acquires new or used trucks," he says.

One of the companies attracted to the Jungheinrich used truck offer is Franklin Silencers. The Northampton-based manufacturer of industrial silencers decided to upgrade its materials handling equipment, and having looked at what was available on the market, opted for Jungheinrich ‘second life’ trucks. 



"We chose used machines because the Jungheinrich models were refurbished to an extremely high standard and represented excellent value for money," says Franklin's deputy managing director Danny Weisenberger.

When Michael Parker, engineering and facilities manager from Alstons Upholstery Ltd in Colchester in the UK, needed to replace his 5 T forklift that had reached the end of its useful life, he researched the market for not only new, but also second-hand trucks, taking into account several criteria.

"A truck of the right capacity was just one element of the purchasing decision," says Parker. "I looked at many criteria from service response to truck design. I needed a truck suitable for the application that was reliable and cost-effective, with the service backup should things go wrong.

"Once I’d stacked up all the costs, buying an approved used truck from Linde made the most sense," Parker says. "Seeing the trucks refurbished to such a high standard means that they end up just like new and a more cost effective solution for us."

Gerald Loiseau, development manager for industrial markets of French equipment maker Manitou BF, says in Europe, the industrial forklift market is "promising" compared to the telehandler market. Manitou says its major fleets are in European countries with mature economies, and fleets are rented with service solutions.

However, the economic slowdown in Europe has caused customers to change their forklift buying habits. "They conserved their forklift fleet during the crisis," Loiseau says.

He adds that customers who could not afford to renew their forklift fleets resorted to renting short-term trucks when their forklifts malfunctioned or were unavailable. "This means if the economic situation becomes better, the natural business flow should straighten up, and short-term rental should decrease.

"[However], we estimate that used equipment is less cyclical than short-term rentals [but] it is a real solution for customers who can’t or don’t want to buy a new truck."

Last year, Manitou launched a website to assist its network of dealers distribute its used machines. The website is now operational for the group’s largest European markets.

Paul Watson, the UK general sales manager at Doosan Industrial Vehicle, says the South Korean brand has seen a steady sales growth in Europe throughout difficult trading conditions.

"Finance agreements and confidence/commitment, are the main stumbling blocks. There’s still a strong demand for equipment, but organisations are finding it difficult to invest in infrastructure of all kinds.

"That said, our total sales in Europe are growing around the same rate as previous years, but our marketshare has [also] increased. We are finding that as more people experience our products, they continue to stick with us. We are also extending our range and market penetration, growing our awareness and business as a result."

Watson says while Doosan has seen short-term hire and used truck sales increase, that is "only part of the story".

"Confidence is very fragile due to the recession, making users nervous about signing long-term agreements. Some are extending contracts for an additional one or two years, and the financially strong businesses are able to take advantage of signing long-term finance agreements. The finance rates we are able to offer continue to make contract-hire agreements the most popular way of funding MHE."

He notes: "Whilst there’s little commitment on either side, the temptation for other manufacturers is to maximise maintenance revenues and we’ve certainly seen that amongst our competitors."

Watson thinks that there will always be a demand for short-term rental and used equipment, "but used machines are getting fewer and are becoming difficult to find and therefore more expensive".

"The fact that short-term rental requests have increased in the last few months is not a surprise and may very well continue until the wider economy picks up.

"Ultimately, the industry needs a regular influx of new machines to keep the used equipment markets going."
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