Why Malaysian Rental Companies Must Stay In Tune with the Economy?

If you aim to become the leading rental company in your field, it's crucial to recognize the significant impact that a good grasp of the broader economy can have on your business. Think of it like this: ‘The performance of the rental company is highly correlated with construction GDP growth.’ In this blog, we'll explore practical strategies and insights that can help your rental business stand out and thrive.

Malaysia GDP Outlook

Malaysia’s GDP growth for the third quarter of 2023 (Q3 2023) is estimated at 3.3%, up from the 2.9% growth in Q2 2023, according to advance estimates by the Statistics Department. The services sector remains a key driver of this growth. Notably, the construction industry making a substantial impact on the country's GDP. Boasting a robust year-on-year growth of 9.6%, reaching RM33.4 billion in Q3 2023, the construction sector stands as a pivotal player in Malaysia's economic landscape.

Let's take an in-depth look at how the current state of Malaysia’s construction industry is correlated with the equipment rental market.

Read Also: Why renting equipment is more sustainable than buying?

Value of Construction Work Done Q1 2020 – Q3 2023 in Malaysia

Source: Construction Statistics, Third Quarter 2023, Department of Statistics Malaysia (DOSM)

From the statistics above, we noticed that the percentage change in the value of construction work done in Q3 2023 shows a 9.6% increase over Q3 2022, which typically leads to a higher demand for construction equipment. As more projects are undertaken, more equipment is required, which construction companies often do not own and hence rent. This is exactly why some rental companies in the market aggressively increasing their investment in the equipment for the past 1-2 years. It totally makes sense as the demand for construction is increasing. 

However, we do not anticipate of drastic increase for this quarter and maybe early next year as we think the construction demand is stabilizing and there is not out of expectation for mega projects issued or planned by the government.

Read also: 6 Factors that Affect the Adoption of Mobile Elevated Work Platforms (MEWPs)

Here are some key considerations for rental companies:

1. Fluctuating Demand
   The fluctuations in the value of construction work done can lead to variable demand for rental equipment. During quarters with high construction activity, rental companies may experience higher demand, while in quarters with less activity, the demand may decrease. Manage the right forecast and plan your inventory well!
    
2. Rental Asset Investment
   Rental companies can use this data to anticipate demand and manage their inventory. For example, expecting a continuation of the upward trend in construction activity, they might invest in increasing their fleet or maintaining more inventory ahead of time. On another hand, if you expect the market is go down, monetize your asset by selling it off. The faster you do, the better price you get.
    
3. Pricing Strategy
   During times of increased construction activity, equipment rental companies might adjust their pricing strategies to maximize revenue, given the higher demand and more competition. Lower your price to maintain utilization when the demand is decreasing!
    
4. Seasonal Trends
   Any seasonal trends in construction activity can also be reflected in equipment rental needs, such as adjustments for the monsoon seasons in Malaysia, which may affect construction schedules and thus affect demand for rental equipment. Even could affect certain equipment category demand as well. For example, when it comes to monsoon season, you will see a lot of water pumps fully rented out! 
    

What’s Next for Current Landscape?

In conclusion, the construction market is stabilizing, leading industry players to adopt a more cautious and conservative approach. While the past two years brought significant growth, it's important to temper expectations for the near future. Especially in the Mobile Elevated Working Platform (MEWP) rental industry, competition is on the rise, with new small players entering the arena and large overseas rental companies expanding into Malaysia.
 

To thrive in this competitive landscape, your MEWP rental business must remain agile and focused on customer satisfaction, innovation, and efficiency. By doing so, you can navigate the challenges and continue to succeed in this evolving market. Get your business smarter? Let's work together with Antbuildz.com!

Read also: Is Singapore’s MEWP Rental Market The Most Competitive In The World?

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