ILMA Compoundings June 2017 - 15

50 percent of new equipment
sales today goes to rental
companies, up from 35 percent five
years ago ..."
Manfredi argues that the availability of equipment rentals
in the U.S. has forever changed contractors' equipment purchase decisions. "In the past," he said, "contractors bought
machinery with little regard for how much they would use
it, simply to have it available."
Machinery sitting in a contractor's fleet doesn't need lubricants. But rental equipment moved between job sites requires
maintenance, including oil changes, more frequently.
The service life of rental equipment gets compressed and
the equipment requires increased maintenance within a
shorter period. This means a higher upfront demand for
lubricants by the rental company owner than would have
been the case if the same equipment were purchased by an
end user/contractor.
Rental owners also are more likely to spend more money
on equipment maintenance than end users/contractors.
According to Manfredi's research, sales of rental companies have nearly doubled from 2009 to 2014, climbing from
$15 billion to $27.7 billion.
RENTAL TRENDS RAISE LUBRICANT QUESTIONS
This trend, of course, prompts questions about total equipment sales and how changes in these sales affect demand for
lubricants. If in-service equipment is used more efficiently,
will fewer pieces be required by the market? If so, will the
total demand for lubricants be lower than it would be without the rental activity?
Hopefully, these types of questions will be valuable when
you're developing forecasts for lubricant demand, production
and distribution. The landscape of the industry is shifting

toward a slightly different demand and use model. Keeping
abreast of these key questions might help those involved in
the value chain for lubricants to stay ahead of the game:
Question 1: How much will lubricant demand change in
the short-term, since rental equipment is used more intensely
by rental companies than by contractors?
Question 2: How will this increased equipment use affect
equipment sales over the longer term, and how might this
change in sales affect the demand for lubricants? Will the
shift to increased rental ownership reduce the number of
units in the field, since sales to contractors will decrease? If
so, what will this do for lubricant demand, considering the
increased use of equipment?
Question 3: How does the potential of increased use of
shared equipment among contractors affect equipment use
and lubricant demand? Since rental equipment will be used
more frequently in a shorter time than if it's owned by one
contractor, how much more will it be used, and how much
will the demand for lubricants increase?
Question 4: If the OEMs are selling more to rental companies
and less to individual contractors, how does it change their distribution channel? If the OEM channel changes, how does that
affect the distribution channel for a lubricant manufacturer?
The bottom line here is that the growth of equipment rental
companies in North America has changed dramatically over
the last five years, and these changes are likely to continue at
least through 2020.
Zirnhelt is chief operating officer and Strategist at Power
Systems Research (PSR), a global market research and
consulting company based in St. Paul, Minnesota. PSR
provides data and forecasting information on engine
production and applications to help companies reduce risk in product
development and market expansion. Reach him at 651-905-8400 or
jzirnhelt@powersys.com.
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ILMA Compoundings June 2017

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