By Brendan Read
Construction lays the foundation for business, including the market for equipment and the financing of these assets. To understand what is happening, Canadian Equipment Finance recently interviewed Denis Martin, who is district business manager, KOBELCO USA (www.kobelco-usa.com).
Canadian Equipment Finance (CEF): What is your forecast for the Canadian construction equipment market?
Denis Martin (DM): The Canadian construction equipment market in 2019 looks to be relatively flat compared to 2018. However, it is looking positive in some areas, such as British Columbia, Alberta, Ontario and Quebec. The Atlantic provinces are still struggling economically. This is predicted to change but not in 2019.
We should start seeing an upswing in some markets in 2019. Eastern Canada is dependent on infrastructure, non-residential work and the housing market, which seems to be going well, especially in Ontario and Quebec. Western Canada is dependent on major projects, such as the expanded Trans Mountain pipeline and other oil-related businesses, whose outlook appears to be fragile. It is difficult to predict how this will look throughout 2019, however, as infrastructure and residential work seem to be continuing in British Columbia.
CEF: What are the top market trends and their drivers?
DM: For Canadian KOBELCO dealers, leasing is not as popular right now as retailing i.e. purchasing equipment. However, this is slowly changing. Given the instability in the construction market across Canada, customers are a bit hesitant to purchase equipment. Until there is more stability, renting and leasing will become more attractive, especially in Western Canada where pipeline construction is the question of the day.
The top emerging trend, though a negative one, is lack of labour. Dealers are having difficulties finding and retaining quality technicians. This is having a negative impact on dealers when it comes to supporting their customers and it’s not looking like this is going to improve anytime soon.
CEF: What changes are you seeing in equipment finance and what is causing them?
DM: Customers are buying less on the quality of the product and more on price based on “how much am I going to pay each month?” Retail financing has become more competitive with manufacturers and dealers now offering aggressive low rate financing on a monthly basis, i.e. zero per cent for 48 months. This part of the business has become an important determining factor for customers buying heavy equipment. Rentals and leasing may become more important options in the coming year for KOBELCO dealers also as more customers look at their purchases as monthly expenses rather than single outlays.
CEF: Are lessees and owners using their equipment longer, choosing to rebuild and upgrade rather than to replace, and why?
DM: Yes, customers are not trading in their equipment as quickly. I don’t believe this will change until there is more stability in the construction industry in Canada.
CEF: Are you seeing technology such as GPS, Internet of Things, play a greater role in equipment management and finance?
DM: Technology has become more important than ever for customers and contractors. Efficiency, improved productivity, time restraints, staffing and other factors are greatly affected by this. Doing a job efficiently and quickly plays into the amount of time using your equipment, the costs involved to use it, wear and tear of the equipment, labour costs and more.
The vast size of Canada also makes telematics extremely important for dealers looking to service machines that are long distances away from the dealerships. The ability to have an idea of what is wrong with a machine prior to showing up allows the technician to fix the problem with one trip. That is a huge benefit to the dealer and end user.
CEF: What are your recommendations to lessees and owners to maximize the benefits from their equipment?
DM: I would suggest scheduling consistent preventive maintenance by their certified original equipment manufacturer or OEM dealer to avoid any downtime. In addition, depending on the number of hours they intend to put on their equipment, I would suggest buying an extended warranty. This will give an added resale value to their equipment and help should they have any issues past their base warranty.
Finally, if you are not an owner-operator, I would suggest seeking a “top” operator to join your business and stay for the long term. A great operator will make you profitable and keep your equipment in tip-top condition. Allocate an excavator to this operator so they can make it theirs as if they own it. Pride in your work and your equipment goes far with this type of operator.