31 August 2022, 14:13
The European Green Deal is the hot topic of the moment in the machinery world, and rental industry makes no exception. ERA Convention 2022 in Riga that took place in June was the perfect opportunity for us to ask Michael Rohmeder, CEO of Equippo AG to share his thoughts on the new EU regulations and on the challenges that he is already dealing with regarding the implementation.
Florentina Chiriță: How prepared do you think the European rental industry is to implement the EU Green Deal regulations by 2030?
Michael Rohmeder: The level of preparedness is obviously much better than it was 5 years ago. The mentalities have definitely changed, but in my opinion, this industry is behind the automotive one. The equipment rental industry is very far behind, for example, with electrification, which is driven by customer demand. It is the same for the construction industry in general, and I think that 2030 gives an extremely short amount of time. Having a big impact on the future of the planet is a very important responsibility that we all have, but I don't think the the equipment rental industry is there yet. When the Green Deal regulatory changes will happen and rental customers will no longer have a choice between combustion and electrification, everybody will be forced to be prepared for implementation really quick.
Florentina Chiriță: What do you think the biggest challenge would be in this long process for the European contractors?
Michael Rohmeder: We have all seen how the market has changed with cleaner combustion engines going from Stage III to Stage V, and the used equipment market will get even more complicated when you have more electrified vehicles. The challenge will be to know what that residual value of the equipment will be when buying it new and figuring out the rental rates for the entire life cycle to not only be green, but also to be profitable, therefore sustainable. If rental companies lose money with electrified equipment, that's not very good for the environment.
There is work to be done around knowing the research of value, but also managing it by having programs for the cleaner machines when they will eventually reach the end of their first life. Right now, this is an underestimated challenge because the used equipment industry does not have to worry about it for around 10 years or so, but it will be after these 10 years, and it will have a huge impact on the economics of the market.
Florentina Chiriță: The implementation of the EU Green Deal might encourage contractors to buy less equipment and rent more, and this will be a great benefit for the rental industry. What is our opinion on this theory?
Michael Rohmeder: The Green Deal is going to be an additional driver in the decision-making process of whether to rent or whether to buy. In the future, besides the current drivers like the practicalities of meeting the needs on the job site, and the economical drivers to the cost of renting versus total cost of ownership, contractors will have to deal with new factors such as the environmental balance sheet and tracking the emissions impact across every activity that they have. That would include, for example, the dispatch of their own equipment to job sites versus the emissions produced by the rental company delivering that equipment. If renting machines proves to be more ecological and will impact this environmental balance sheet positively, the rental industry will win.
Florentina Chiriță: How do you think the Green Deal regulations will transform the European rental industry in the long run? Do you think that the rental industry will become more competitive after the Green Deal?
Michael Rohmeder: Start-ups with disruptive potential and competitors that no one imagines existing at the moment will be relevant 5 years or 10 years from now so yes, I think that the competition will remain fierce and will probably not come from the people that attended the ERA this year, for example, but from companies and people that nobody knew that they even existed on the market.
Florentina Chiriță: Do you think that the current political conflict in Ukraine will affect the implementation of this process?
Michael Rohmeder: Everybody is losing in this unfortunate situation and the people that are losing the most are obviously those who are in the middle of the war zone. We, in Western Europe, have lost stability and that means confidence, and low confidence often means crisis. By losing that stability we have all started to lose a lot more than we think right now. How big that impact will be depends a lot on what happens in the future, but there are a lot of reasons for hope as well. Looking at what has happened so far, we cannot deny the economic impact, which is very relevant for the current situation, but still limited.
For Equippo the impact has been quite limited. We stopped selling to Russia, we canceled several orders, and we refunded the money. We also had some sad situations where we could not find the logistics - at the time when the war broke out - to deliver equipment into Ukraine that would have probably been needed there, a situation that has rearranged itself since then. Now, for us it is clear where we can deliver and where we cannot deliver.
We have also experienced a shift in demand for the Eastern European market, but it did not impact our sales because Southern Europe and Africa, as well as South America immediately picked up and bought what was previously ordered by the Eastern countries. The confidence level there clearly dropped, and people did reduced spending money or started to invest less, but the used equipment market was so far not tremendously impacted because there is such a lack of supply, that the demand just pops up from other regions.
Florentina Chiriță: What are Equippo’s business plans and expectations for next year?
Michael Rohmeder: We have huge ambitions and a big vision to connect contractors and rental companies around the world and give them the most direct access possible in a trustworthy way, so that the rental companies can transact directly with a company that will give their assets a second life, no matter where in the world they are. That is something that we are scaling this year in Germany and France, and I expect that this year we will make a tremendous progress in those two countries, so that we can prepare for the European expansion, from 2023.
Source: LECTURA Verlag GmbH