Over the past few years, the construction industry has experienced great disruption mainly due to supply chain issues, manufacturing delays, and escalating costs of materials. The construction equipment sector has not been shielded from these challenges that have had a wide extended impact on contractors as well as equipment manufacturers. One of the most notable effects has been the shortage of new construction machinery due to production decline, supply chain disruptions, and stepping-up demand for equipment around the world. This has led to a severe shortage of new machinery which has put a lot of pressure on contractors and construction companies to seek the next best solution to ensure that they can continue with their projects on schedule and within the financial plan. Therefore, there is a growing demand for used construction machinery as more businesses want to attain the balance in the absence of fresh investment in new construction equipment. The procurement of used equipment can be a cost-effective and ready-made solution to the issue, and as we have seen many contractors have opted for this solution especially when they are faced with long lead times and high prices for new machines. In this article, we will look at how the lack of new equipment is positively impacting the used equipment market and what this means for the construction industry.
Supply Chain Disruptions Impacting New Equipment Production
The construction equipment industry is global and it depends on manufacturers of the equipment, the raw material providers, and the logistics. Generally, supply chain disruptions in recent years, particularly due to the COVID-19 outbreak which still has some effects, have significantly impacted the manufacturing of new machinery by experiencing significant delays. Deficiency of some components which include semiconductors, steel, and rubber have been among the causes of these delays. Leading equipment manufacturers like Caterpillar, Volvo, and Komatsu have had to deal with these issues, which have slowed down their capacity to produce new machines in a manner that will effectively meet demand. Consequently, lead time on new equipment orders has reached several months and in some cases over the year leading to a backlog in deliveries.
Increased Demand for Used Equipment as a Solution
New machinery orders have inevitably been delayed and there is no obvious remedy in the foreseeable future and many construction contractors have turned to the used equipment market. This sector has become the major source for contractors and business people with limited financial capability to wait for new machines as the nature of business requires machines to be delivered and used on time due to project timelines and other deadlines. Used equipment offers several key benefits:
Immediate Availability
One of the biggest advantages that used machinery has over new equipment is that it can be bought and shipped more quickly, which is very helpful for contractors who are in need of equipment immediately.
Lower Initial Cost
Used equipment is more affordable to buy than new machinery offering another advantage for companies that have to set up tight budgets but still want to obtain high-quality equipment.
Availability of Popular Models
The used equipment market has a wide range of vintage and technologically wise machinery, which are well-maintained and in good working condition, this allows the businesses to select the right machinery for their respective projects.
Revival of the Rental Market
This shortage of new equipment is also helping to drive the used equipment rental market. Rental companies that usually own a fleet of new machinery have shifted to the acquisition of used equipment due to the rising demand from contractors in need of short-term machinery services. The addition of used machines to the fleets being rented out by these businesses enables the provision of a variety of equipment for rent, which is relatively cheaper to acquire as compared to those that are new. This trend is important since the contractors appreciate the convenience of renting tools for particular operations due to time and financial constraints. As rental fleets grow with used machines, the rental market will also continue to grow due to the excessive availability of equipment.
Impact on Equipment Maintenance and Longevity
In light of increasing used equipment purchases, contractors also have to pay more attention to maintenance and condition evaluations. Purchasing used machinery can be less expensive than buying new machinery but still, the state and reliability of the machinery have to be closely assessed so that the construction process does not experience downtime and additional repairing costs for the machinery. Buyers should exercise caution in screening the history, records of services, and general condition of the equipment before making the purchase. Maintenance services and spare parts for used machines have also become more easily available due to the growth of the used equipment market and the leading equipment manufacturers as well as third-party suppliers are also playing a role in making it easily accessible. The equipment refurbishing companies are also benefiting from the situation as they provide services to bring used machinery to modern standards.
Outlook for the Used Equipment Market
It is possible to conclude that the demand for used construction equipment will remain high shortly. So even in case supply chain constraints subside gradually and original equipment makers start producing new equipment in large numbers, the demand for used equipment is likely to continue riding because of the above-mentioned factors. In addition, as construction companies continue recognizing the aspect of reusing machinery as an essential part of their operations, then used machinery may become a strategic asset of a company’s long-term strategic planning and business model with also a focus on maintenance, upgrades, and sustainability.
In Essence
The shortage of new construction equipment because of supply chain constraints and manufacturing problems has without a doubt promoted the used equipment segment. This is because contractors looking for equipment that is readily available in the market, is budget-friendly but also powerful machinery which has been pushed by the growing market toward used equipment. Although this increase in demand has increased the prices of used equipment, it has also created a lot of business opportunities in the used equipment market for companies in the rental business and online marketplaces. With such dynamics still defining the construction industry, the sector with the used equipment is likely to continue being a critical market in the construction business globally.
