What has changed for construction OEMs due to Covid-19? As the world begins to emerge from the 2020 pandemic, sales growth is high on the agenda for construction equipment manufacturers. This has shone a spotlight on the key role that the right vendor finance partnerships can play in enabling them to succeed in the evolving industrial and economic landscape.
So, how have OEMs finance needs and strategies evolved due to the pandemic? And how can DLL support construction OEMs for a potentially uncertain future?
Covid-19 – changes and challenges for construction OEMs
After a short term slow down early in 2020, the construction industry globally remained quite stable. For instance, many large infrastructure projects still moved ahead, even where areas like residential development slowed. However, the biggest hurdle to overcome was not a lack of work, but a lack of uncertainty.
The pandemic was a situation that hadn’t been encountered for generations. Those who may have readily procured new construction equipment before, were now questioning whether it was the right time to invest, or if it was better to wait. While for OEMs, production lines were impacted, with lockdowns and restrictions affecting the amount of equipment that could roll out of the factory.
Disruption to projects also resulted in disruption to payments and cashflow, meaning companies would need to dip into working capital lines if they wanted to invest. Even large businesses who had previously had enough working capital to fund their investments were enquiring about asset finance for the first time. Just about every type of equipment was touched by the pandemic.
Meanwhile, some OEMs found themselves unable to offer their usual finance deals during the pandemic, leaving some businesses unsure where to turn. Many of these OEMs were seeing the true importance of working with strategic partners, rethinking their strategy, and considering if their current finance options were good enough. While at the same time, OEMs that did not have a commercial finance offering in place suddenly needed one, as payments and equipment sales slowed, and factory outputs sometimes reduced.
This is one area where DLL added enormous value to construction equipment users, dealers, and OEMs – continuing to lend and offer flexible packages during 2020 through our OEM partners, making investment in equipment possible.
In part, this is down to the DLL purpose of partnership. Seeing the world through the eyes of our partners and creating mutual success is central to what we do. That’s why we’ve had partnerships with many equipment manufacturers for decades and why we’re able to offer long term partnerships through the good times, and the bad – even a global pandemic.
Emerging into the “new normal” for vendor finance
In this pandemic, everyone has been forced to adapt their way of working. Though restrictions are easing globally, things have changed for construction OEMs and their customers, giving rise to different requirements when it comes to finance.
For example, aging equipment will always be a challenge, but some users may find it harder to finance it now. Plus, the shortage on cash and free liquidity will likely continue after the pandemic, and it will take time for businesses to replenish capital and reinstate cashflow.
However, change presents new opportunities for vendor finance partnerships to aid growth for equipment manufacturers. Though there are several key considerations.
Flexible expertise
In general, there is a greater demand for shorter financing, but with more varied options for the future. Flexibility is needed, to enable OEMs to be prepared for the unknowns ahead, as end users will likely remain uncertain on the right time to invest.
Vendor finance partnerships from DLL are ideal for catering to the flexible needs of end users, and OEMs. Our solutions are never “off the shelf”. We tailor each vendor finance program towards the specific manufacturer, that we can customize as the relationship develops and requirements change. This is partly because we are asset specialists, that understand both the equipment, and the credit side of the equation.
Schemes like “Buy now, pay later” and special promotions, such as “rent to buy” campaigns, are in greater demand and, with the support of DLL, OEMs should use this to attract more customers to invest after the pandemic. This applies to end users at every level, from a small business with one piece of equipment, to multi-national construction rental houses.
Digitalization
Dealers have largely managed to maintain their business during the pandemic, which is a success in itself. However, to grow, dealers now need to sell equipment via other means. Customer visits and trade shows are unlikely to return to how they were for some time. This is driving the adoption of digital tools across the business, and finance is no exception.
DLL is ready to help, with digital tools, alongside an experienced and knowledgeable team to provide a long-term partnership. The pandemic accelerated our ongoing plans to improve digital capabilities, so financing and quoting can now be done digitally at the point of sale, saving time and paperwork. And our goal is to offer even greater digital options in the future, helping to ensure business continuity in case of further disruption, whatever the cause.
Reliability and consistency
In the bad times, DLL has maintained the level of employees in place to help OEMs, ensuring they can continue to rely on the same expert team. Having a reliable finance partner in place is essential as the industry recovers.
This is not a financial crisis. Most projects are not cancelled, they are postponed, so equipment will still be in demand and businesses will need to invest as part of their recovery. OEMs need to be ready for a boom in requirements for new equipment further down the line.
DLL can support this internationally, providing one point of contact that can deliver unique and customizable finance programs all over the world. Our global view enables DLL to service smaller or more challenging markets, as well as larger more mature regions – wherever we operate, our partners can expect the same consistent high service levels and experience.
Futureproofing
The world is changing, and not just because of Covid-19, and emerging trends will inform new finance requirements. However, flexibility remains critical, as solutions today may not be the right match a few years down the line.
A global aim to improve the planet, for instance, means some businesses need support to invest in new sustainable solutions. For instance, electrification is a big trend that sees many commercial construction companies with a new need to invest in lithium-ion equipment so that they can work in inner city areas. In regions where diesel emissions are becoming regulated, they will have no choice but to do this, and will need the financial support.
Innovation is another driver. The construction industry is perhaps behind some other sectors when it comes to “Big Data”, for example. Yet businesses are increasingly looking to improve their processes with better digital connectivity and telematics solutions.
DLL will be there to help finance these changes, so that construction businesses progress, investing with our OEM partners. With 50 years in leasing, we are committed to long term thinking, delivering solutions fit for today while planning for the future.
A partnership for growth
DLL is ready to partner with you as an OEM to arrange financing under your brand name, that is tailored to the requirements of your business and your market. We know from experience that our flexible approach across the whole sales chain is the best way for you to grow your sales and help your dealers to increase profitability. Our finance programs can be seamlessly integrated in the sales channel, making it easier and quicker for end users to invest.
As asset specialists, we bring knowledge and expertise that you simply can’t get from a bank. And we’re here for you, whatever happens. Contact New Business Development Manager (Americas) Michael Hart, or New Business Development Manager (Europe & AsiaPac) Marco Wagner to find out more about how we can support you; or find out more about how we support the construction industry.
