The Russian rental market is expected to experience a second wave of declines

Disclaimer: this article was originally published by Machinery Intelligence Agency.

Sources: https://mp.weixin.qq.com/s/RC9foywtsft2kgSo-K4uSA

In 2025, leasing of Road construction equipment could decrease by 25 percent, while leasing of freight vehicles could decrease by 22 percent. Leasing in the rest of the retail sector is expected to grow 3 percent. Growth drivers include oil and gas extraction equipment, as well as forklift and other equipment for warehouses.

Overall, according to the forecast by the rating agency ExpertRA, by the end of 2025, the volume of leasing business in Russia is expected to decrease by 15-25%. This signifies that for the first time in the past decade, the market will experience negative growth for two consecutive years. In 2024, Russia’s new leasing business decreased by 7%, falling to 3.3 trillion rubles. There was a significant downturn in the retail sector, while the corporate sector (railroad equipment and real estate) remained stagnant. In fact, some large-scale transactions in the corporate sector last year “rescued” the leasing market: without these transactions, the market could have declined by 17% directly. The decrease in commercial activity, especially towards the end of last year, was driven by a tightening of monetary policy and an indirect increase in the recycling tax. In 2024, new business volume in the retail sector reduced by 9%, mainly due to decreased transactions in freight vehicles and construction equipment. Leasing construction equipment decreased by 23%, and leasing of freight vehicles decreased by 18% (in contrast, in 2023, leasing of freight vehicles had doubled).

ExpertRA emphasizes that transportation companies not only postponed investments to update their fleets but also began returning previously leased vehicles ahead of schedule. To alleviate financial pressure on leasing clients and maintain business, leasing companies adjusted contract terms. By the end of 2024, the average level of prepayments dropped to 11%, but this was primarily due to cooperation with existing customers. The average contract duration also changed, enabling leasing clients to reduce their monthly payment expenditures. In the retail sector, the average duration of contracts increased from 35 months to 37 months.

According to ExpertRA’s forecast, in 2025, due to high interest rates, the demand for equipment leasing will be restricted once again. As mentioned above, the market will decline by 15-25% compared to 2024. This year, both the corporate and retail sectors will be affected, with the main decline still concentrated in freight vehicles and construction equipment. The Construction machinery leasing market is expected to decrease by 25%, due to a combination of rising housing prices and high mortgage interest rates leading to a decrease in housing demand. In the road construction sector, the pessimistic forecast is due to a lack of new large-scale projects.

Finally, there are some optimistic factors as well. Due to the active development of alternative natural resource export channels, in 2025, oil and natural gas extraction equipment will be one of the drivers of growth. ExpertRA also provides a positive forecast for forklifts and warehouse equipment. In this context, optimism in the leasing market stems from the development of e-commerce.

Keywords:

1. Road construction equipment

2. forklift

3. Construction machinery