Capital expenditures on heavy construction equipment are substantial. When businesses decide to purchase these types of heavy construction equipment, they search for used equipment that may be available in the local market. This benefits them in a variety of ways. Businesses occasionally acquire used heavy construction equipment that is in like-new condition but costs significantly less than what is offered in the showroom. Additionally, purchasing heavy construction equipment locally reduces transportation costs. These overheads have a negative impact on the balance sheet because they result in an increase in project costs.
Financing is a significant consideration when purchasing heavy construction equipment. The majority of businesses look for times when interest rates are low and they can get a good deal. External investments in developing countries are determined by the rate of economic growth. A growing economy attracts substantial foreign investment. As a result of the increased financial inflows, interest rates are much lower. Thus, purchasing heavy construction equipment or renting it is far more cost effective.
Following the majority of countries’ market opening and signing of the GATT agreement, there has been an increase in competition and a decrease in the cost of equipment. Additionally, heavy construction equipment is manufactured in more locations than ever before. This trend has accelerated in recent years to meet the global market’s demand for infrastructure and to provide cross-country support for infrastructure development. Additionally, the economies have seen an increase in their duty-free import structure. However, in the case of developing economies, increased exports and development of domestic markets are still required to support domestic imports.
Heavy construction equipment demand is more regional in nature. In the United States and Western Europe, upgrading existing facilities is more important than developing new projects. These countries require maintenance and upgrading of existing projects, which is even more critical for the long-term viability of existing infrastructure.
In developing countries, infrastructure development is more critical. This includes rail, roads, flyovers, high-rise buildings, airports, and urban development. All of this necessitates extensive construction work that necessitates the use of heavy construction equipment. The United States, Japan, Germany, the United Kingdom, and France are the largest producers of heavy construction equipment, followed by Italy, South Korea, Canada, Sweden, and Belgium. There are also manufacturing facilities in other countries, including China, Russia, and Latin America. More manufacturing facilities for heavy construction equipment are expected to spring up in low-cost material and labor locations.
Rentable heavy construction equipment is also available. These are easily leased on the domestic market. It is far more advantageous to rent heavy construction equipment, if only for a day or few days, than to purchase it and then sell it at a loss or to incur overhead costs such as transportation, maintenance, and so on. Purchasing heavy construction equipment is not a popular choice. Due to the tax structure in the United States, long-term leasing is much more preferred than purchasing.