Local Feature story

The used forklift market, bouncing along

Thursday, 29 April 2010 ( #459 )
Sierra Equipment Company, United States
Sierra Equipment Company, United States
As the materials handling industry reeled from the rollercoaster ride of last year, most sectors of the industry found themselves at the bottom of the loop, but encouragingly, some found themselves a little better off. Melissa Barnett reports on one of the more buoyant sectors - the used forklift market.

While new forklift sales plummeted by up to 60% last financial year, the used forklift market generally maintained financial equilibrium; many dealers worldwide reported sales actually increasing in the same period. Luis Garza, director general of Mobinsa in Mexico, says " the global financial crisis didn't have a negative impact; in fact, sales increased".

Others, in both the UK and USA, have reported that although sales are up, profit margins have been reduced. Gary Hansen, vice president of Capital Equipment and Handling Inc, Nissan, USA, says that in his business, "used sales were only slightly down but margins on used equipment were down by 5%". David Pickering, business development manager of Impact-Handling, UK, tells Forkliftaction.com News that although new sales were down more than 56% last financial year, used volumes were up. However, they too were accompanied by lower margins.

The impact of the GFC

There are a number of reasons for the resilience in the used forklift sector. As a result of the global financial crisis, many found themselves either out of business or initiating severe cost-cutting exercises, such as reducing fleet numbers and unwanted stock. This had the effect of flooding the global market with good, low-hour used equipment. Initially, this played havoc with pricing. As Koen Lisman, CEO of Lisman Vorheftrucks, Netherlands, explains: "The used market could not absorb all the machines. The auction houses were very busy. As a result, there was a dramatic reduction in used forklift prices."

Pro-service & Consult, Germany
Pro-service & Consult, Germany
Norbert Zimmerman, managing director of Pro-service & Consult, Germany, agrees and says that used forklift prices have fallen 50% since October 2008. He cites too many units in the market place. In the US, Rod Kiser, used equipment manager at JM Equipment, says retail and wholesale prices of used equipment dropped 20-30% because of flooding of the market with ex-lease/rental/stock inventory. Since then however, the market has steadied and pricing has firmed.

The used forklift market was protected, in large part, by its price advantage. As Cliff Chadwick, CEO of Chadwick Forklifts, points out, a new 2,500kg forklift in Australia costs around AUD28,000 (USD25,000), a low-hours machine in good condition would cost half that. It just makes good economic sense to buy used equipment when money is tight, he notes.

Tomas Gonzalez of Hanse-Maschinen GmbH in Germany believes there are currently fewer incentives to buy new. For example, many warranties on new forklifts are obsolete after only 2,500 hours and newer machines have complicated electronics making them difficult to repair except by the manufacturer. Many end-users repair and maintain their own equipment as a means of reducing costs, so having to use a manufacturer's service technician can be onerous.

Cost-cutting during the GFC has also seen companies holding onto forklifts for longer or turning to used equipment when they might traditionally have ordered new machines.

Changing markets and buying patterns

N.P. Trucks, Denmark
N.P. Trucks, Denmark
There is a belief in the used forklift market that application drives the sale -application meaning both the number of hours the machines will be used and the type of work the forklift will be doing. Agribusinesses have traditionally been buyers of used machines due to price, the ease of repairing older machines and the irregular working hours of agriculture. Co-incidentally, this sector and other food-related industries in most countries have remained resilient during the GFC.

Kiser says from experience that "agriculture, farmers and aftermarket suppliers have kept JM afloat through the global financial crisis".

Small to mid-size businesses and start-ups are also strong supporters of used forklifts. Garza, who sells both new and used forklifts, says that customers are increasingly asking for used machines instead of new. Capital's Hansen says that smaller companies with one or two units and new companies that do not want to invest too much in materials handling or don't have sufficient credit tend to buy used forklifts. Noboru Uchiyama, manager of F.Uchiyama & Co in Japan, also believes that many smaller businesses buy used machines to avoid dealership problems. In Peru, Dahx Zapler of Montacargas Zapler reports that even big businesses are buying used over new forklifts, seeing them as a better investment in the current market. In Europe, the traditional used buyer markets in Eastern Europe are still strong.

Lisman Vorkheftrucks BV, Netherlands
Lisman Vorkheftrucks BV, Netherlands
In the past, much of the European used forklift stock has come from Japan. This is still the case, but new sources such as receivership auctions and OEMs offloading stock have increased competition in the used forklift marketplace. Lisman has noticed that many of the bigger independent dealers and rental companies are focusing more on used forklifts and, furthermore, selling direct to the end-user. This is also evident in the US market, where new emission control standards in some states, particularly California, has seen some dumping of older units onto the market. Lee Hamre of Hamre Equipment explains: "Used machines older than 2003 have stopped selling in California due to the California Air Resource Board regulations. This has had an enormous impact on both buyers and sellers by limiting choice of stock and budget. There is no domestic market left for older machines; they are all exported." Kiser adds that medium to large fleet users need to buy new or very late model units to stay compliant.

There is no sector of the forklift market which does not carry used equipment; however, some areas are faring better than others. Gonzalez believes that the economic uncertainties brought on by the GFC mean that end-users are holding on to their old machines for longer, particularly the big container handlers. Gonzalez predicts this will result in a shortage of used handlers in the future. Egil Nielsen, manager of N.P. Trucks, Denmark, remarks that sales of used forklifts in his country now outnumber new, but sales of big used trucks are much lower than in previous years.

Larry Jenkins, sales manager of Big Red Inc, a US manufacturer of forklifts over 16,000 lbs (7 tonne) says, "used sales surged at the beginning of the recession but since the recession (have) plateaued; both used and new have come to a virtual stop". He goes on to add that some stevedoring and container handling operations in his area of the south-east are still making occasional purchases.

The odd thing about current used forklift sales around the world and even within countries is that sales are very inconsistent. In the US, the mid-west is experiencing bumper used equipment sales, while reports from more urban areas are fewer. Dan Caswell of AIS Equipment in North Dakota reports that business is so strong in his region that several out-of-state companies have moved in, hoping to garner some business. Yet in California, Hamre tells Forkliftaction.com News that over the past two years, he has been forced to do 70% of his business overseas, adding that, "it is impossible to keep the doors open if you only deal in your close area". South American countries such as Mexico and Peru are also reporting good domestic sales. Zapler expects to sell 200 used machines this year in Peru.

In Europe, countries seem closer in parity. Lisman says that his company sold more than 4,000 used units in 2009, while the German, Danish and UK dealers Forkliftaction.com News spoke to all say that used forklift sales are steady. Gonzalezhas found that his customers are tending to buy a mix of new and used machines, using the older machines as back-up units in case of break-down -no-one these days can afford long downtimes in production. In Japan, meanwhile, used forklifts have suffered almost as much as new. Uchiyama believes sales of both new and used forklifts are down 50-70% in Japan.

Buyer beware

Used forklifts don't usually come with warranties, so it is essential that buyers are aware prior to sale of safety and operating standards with which the forklift should be compliant. Most dealers will have this in hand, but for buyers' information, there are a number of websites and check-lists available online. Raymond Corporation has a comprehensive 20-point checklist that covers most areas. Things to look for include repair or replacement of all safety equipment, filters, oil, tyres, used fork-tynes and masts, mirrors and seats, according to the checklist.

Low-hour machines, fewer than 1,000 hours, will always fetch better prices. In some machines, running hours are important. For example, LPG running hours are more critical than for diesels. Batteries are expensive, sometimes more costly than a used machine, so ensure that the battery is either recharged or replaced.

Buying imported used equipment can also be tricky. The buyer/seller need to be aware of domestic safety and environmental controls. Australia and New Zealand have stringent cleaning protocols and goods must be workplace-compliant prior to release from the wharf. In December, 2009, the UK brought in updated LOLAR regulations which apply to any forklift over one year of age. A number of Middle Eastern countries won't allow the sale of any forklift more than eight years old. In China, all forklifts are on the government inspection list and must meet all the necessary criteria before being passed.

The year ahead

TRAFIK Bremen, Germany
TRAFIK Bremen, Germany
Most in the industry are cautiously optimistic about the used forklift market for the next 12 months. There is consensus that stock levels will balance out, stabilising prices which will be sustained as lead times for new forklifts prove to be longer than expected.

Some areas such as LPG and electric are expected to perform better than others as there is already a general trend towards these types of forklifts, due to tightening emissions standards and efficiency issues. These forklifts are expected to bring better returns than diesel.

Few believe that government fiscal incentives have had or would have an impact on used forklift sales as most of these are geared towards new equipment. Most used dealers believe that it is up to them to attract buyers and many plan to do this through more aggressive marketing campaigns, improving customer service, offering high-quality machines and better pricing. It is a unique climate in used forklifts at the moment and the winners are the buyers.
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