Table of contents
The equipment rental & leasing industry comprises businesses that provide their equipment for a definite period to customers in exchange for fees. While the terms rental and leasing are often used interchangeably, leasing contracts tend to have longer durations and predefined renewals or ownership transfer conditions at expiration. We segmented the European market based on types of equipment offered: (i) industrial equipment, (ii) automotive, (iii) electronics and (iv) media & entertainment.
The European rental & leasing markets vary in terms of fragmentation. The automotive market is characterised by the strong consolidation in the short-term car rental segment and the increasing presence of car manufacturers in the longer-term leasing segment. On the contrary, the industrial segment remains moderately fragmented due to highly specific customer requirements influenced by location and project type, among other factors. A handful of European consolidators are well-positioned to aggregate such demand, benefiting from associated economies of scale.
Sponsor-led interest has been moderate with ~30% of identified assets backed by financial sponsors (April 2023). In particular, the electronics and media & entertainment segments demonstrate the highest penetration of institutional capital. Respectively, the investors are attracted by the (i) organic growth on the back of consumers shifting from ownership to flexible renting or leasing solutions and (ii) long-term demand visibility from a niche customer base.
Relevant ESG topics primarily revolve around environmental issues. Leasing is regarded as an inherently sustainable business model, reducing carbon footprint thanks to higher utilisation rates and extended useful life of equipment. Additionally, the players can further strengthen the green transition by focusing on responsible recycling and disposal and increasing share of green equipment offered in their fleets.
Technavio (November 2022) estimated the European vehicle leasing market at ~$368bn in 2022, forecasting it to reach ~$460bn by 2027 at a ~4.5% CAGR
The top 15 European markets for construction equipment rental were valued at a total of ~€25.7bn in 2022 with single-digit growth rates projected for 2023-2024 (Loxam, March 2023)
Aggreko (March 2021) expects the global speciality equipment rental market to grow at a ~5% CAGR in 2020-2030, surpassing $15bn by the end of the period
Ongoing shift from asset ownership to rental models among businesses (Loxam, March 2023). While leasing options can lower operating costs and free up capital, the European leasing penetration rates lag behind the US figures (~55% for construction equipment; IMPAX, April 2022), highlighting potential for further growth
Technological advancements will facilitate incremental operational efficiencies (For Construction Pros, March 2022). Telematics and IoT systems can be used to locate equipment, optimise transportation schedule and enable continuous tracking, thereby maximizing the fleet utilisation
Underlying sustainability benefits will reinforce demand for rental equipment. Lower carbon emissions per unit of useful life (IMPAX, April 2022) and managed disposal of equipment (Tokyo Century News, January 2022) allow leasing clients to improve their ESG performance with limited incremental costs
Disintermediation threats from suppliers. As equipment manufacturers gradually integrate rental and leasing options as part of their offering (Hogan Lovells, May 2019), the lessors will face fewer growth opportunities and capped profitability, similar to pure-play automotive rental businesses (Leasing Life, February 2022)
Suppressed short- and mid-term B2B demand amid the economic uncertainty in Europe (European Commission, February 2023). In particular, the industrial equipment niche is threatened by the decrease in European construction spending projected for 2023-2024 (Construction Europe, January 2023)
Personnel shortages are likely to hinder growth and profitability (For Construction Pros, March 2022). From the perspective of young potential hires, rental businesses are disadvantaged versus alternatives with stronger branding and prestige attached, resulting in higher labour acquisition costs (International Rental News, April 2022)
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