Trailer Magazine

Rental market on expansion course

  • Posted on Tuesday 7th, January 2014.

Flexibility is an important cornerstone of any modern business, as it can help it adapt to a changing business environment and remain competitive. In the capital-intensive transport industry, however, flexibility can come at a high cost when needed at short notice. For example, some only require a trailer for a specific project or contract, and once that is fulfilled it doesn’t make sense to hold onto the unit. Others may need to hire gear while they have new equipment built. In both cases, a rushed purchase may be short-sighted. That’s where specialised rental companies come into play.

According to an IbisWorld report, despite the recent economic downturn, the trailer and truck rental industry in Australia has experienced solid growth over the past four years. In fact, IbisWorld predicts this sector of the industry to grow by 2.3 per cent until 2014, reaching a volume of $87.1 million.

However, IbisWorld also states that the growth is understated, as it comes off a high base year in 2008-09. Over 2008-09, the industry benefited from an increase in merchandise imports and exports. The road freight industry, a key source of industry demand, actually declined during the same year.

“Although declines in road freight are usually bad for revenue, when combined with a simultaneous growth in merchandise trade, it was in fact beneficial for the industry,” says Kosta Lev, IbisWorld’s industry analyst. “Road freight companies delay purchases of new vehicles for their fleet during tough economic conditions, instead favouring rentals to boost their short-term fleet for temporary increases in capacity demand.”

According to Kosta, revenue fell in the following year (2009-10), as merchandise trade dropped and road freight required less capacity. But, growth has steadied since, with global economic conditions improving and demand from road freight stabilising. IbisWorld is now expecting revenue to grow by 2.4 per cent in

Industry profitability, meanwhile, has declined over the past five years and is expected to continue to do so over the five years until 2018-19, when factoring in increasing wage costs as companies hire more on-site staff for maintenance of their vehicles.

“Over the next five years, increasing competition will continue to put downward pressure on profitability as companies narrow margins to promote demand,” Kosta says. “Even so, profitability remains considerably high for the industry as it supplies high-value, niche products.”

From 2014 and beyond, IbisWorld predicts demand from road freight companies will continue to be the main driving force of revenue. According to the report, the rental industry displays a low level of market concentration, with Rentco as the only major player.

“Our last six years have been strong from a sales point of view,” says Rentco Managing Director, Bob Shier. “Like any other business, keeping costs down, being patient and holding onto your own equipment is what keeps you going even in tough times.

“The rental/ leasing market for trailers is reasonably strong, however, it did flatten off on the west coast during mid-2013. But we don’t look at the downswing as a negative, but rather a great opportunity for us to re-group and push for stronger growth in 2014. In comparison to the western side of the country, our research has shown that the trailer rental sector is growing throughout the rest of Australia. That’s why 2014 will be a huge year for Rentco and we are projecting substantial growth.”

Rentco’s unequivocal motto remains providing premium material at any time, anywhere. The Perth-based rental specialist says one key element to achieve that is listening to the company’s immense client‑base. “We are a very client-focused and service‑driven business, and dropping off equipment to them is where our service starts, not ends. Maintaining that close bond with the customer is what we value most,” Bob says - revealing that Rentco will continue to add the latest technology to its fleet.

“In recent years, we have invested more resources into additional equipment such as tankers and side-loaders,” Bob says. “Now, we are looking at adding terminal tractors and lightweight skels to the mix with different types of configurations to cart shipping containers. “The containers we see today are simply bigger, longer and higher, which means we need to make sure we have the appropriate trailing gear to support that.

“After all, we are in the business of providing a variety of equipment for the job wherever and whenever it may be needed. That’s why we need to run the best, most up-to-the-minute fleet in Australia and ensure that it is perfectly serviced at all times, ready to go out and get the job done when we get the call.”

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