Making Capital Investments In Heavy Construction Equipment
Heavy construction equipment requires a lot of capital
investments. When the companies opt to buy these types of heavy
construction equipments then they look out for the used
equipments that may be on sale in the local market. This helps
them in various manners. Companies sometime get used heavy
construction equipment which are as good as new but the cost is
much lesser than that offered in the showroom. Moreover, buying
heavy construction equipment from the local market reduces the
transportation cost as well. These overheads not look good in
the balance sheet as they lead to increase in the project costs.
Financing is a major concern while buying heavy construction
equipment. Most of the companies look out for times when the
interest rates are low and they can strike a good bargain. In
developing countries the rate of economic growth determines the
external investments. A healthy growing economy attracts heavy
foreign investments. Thus since the financial inflows are more
the interest rates are much low. Thus buying heavy construction
equipments or taking them as rentals is much more economical.
After the opening up to the markets and signing of the GATT
agreement by most of the countries there has been increase in
the competition and reduction in cost of equipments. Moreover,
the heavy construction equipments have been manufactured at more
locations than before. This trend has been on increase to serve
the global market and cross-country support for infrastructure
development. Moreover, there has also been increase in the
duty-free import structure in the economies. But in case of the
growing economies, increase in exports and development of local
markets is still required to support the imports in the
countries.
Demand for heavy construction equipment is more region-specific.
In US markets and Western Europe, requirement for up-gradation
of the locations is more required rather than developing new
projects. These countries require maintenance and upgrading of
the existing projects, which is more crucial for the existing
infrastructure for long time sustenance.
In case of developing countries, building up of rail, roads,
flyovers, high-rise, airports, and urban development is more
crucial. All this requires lot of construction work, which
requires use of heavy construction equipment. The largest
producers of heavy construction equipment are located in the
U.S., Japan, Germany, the U.K. and France, followed by Italy,
South Korea, Canada, Sweden and Belgium. There are manufacturing
units located at other locations also like China, Russia and
Latin America. More manufacturing units for heavy construction
equipments are expected to crop up at locations, which offer low
material costs and cheap labor.
Heavy construction equipment is also available on rent. These
can be leased out easily from the domestic market. It is much
more beneficial to take the heavy construction equipment on rent
or on least for a day or few days rather than purchase them and
then sell them at lower cost or carry overheads like
transportation, maintenance, etc. Buying heavy construction
equipment is not much preferred option. Mostly in the US,
long-term leasing is much more preferred over purchasing due to
tax structure.