Disclaimer: this article was Originally published by Machinery Intelligence Station. Sources: https://mp.weixin.qq.com/s/y8_BErbQamzEss147XXwXQ
This article is a compilation translated from foreign media reports; the viewpoints expressed within do not represent this station. Submissions, sharing, and discussions are welcome.
The increase in the number of construction machinery equipment repossessions is closely related to clients’ declining ability to pay, set against the backdrop of complex macroeconomic conditions in Russia.
As interest rates rise and other economic factors come into play, Russian leasing companies are facing an increasing number of equipment repossessions due to credit issues. The main reason is that many companies, especially small and medium-sized enterprises, are struggling to fulfill the obligations set out in their lease agreements. In addition, some equipment is delivered without any down payment, which further increases the risk for leasing parties.
The rising number of equipment repossessions is associated with the increase of the key rate by the Bank of Russia, as well as the recent increase in the scrappage tax. These factors add extra pressure on businesses, forcing them to cut expenses, including the cost of maintaining leased equipment.
Experts believe the situation may further deteriorate. Currently, sales of construction and road-building equipment have already fallen, and it is expected that demand will decrease further with the conclusion of large construction projects. All these elements expose the specialized equipment market to the risk of stagnation, thereby exerting even more pressure on the leasing industry.
Beyond external factors, the risks taken by leasing companies at the end of 2022 to the beginning of 2023 have also impacted the situation. During this period, there was a widespread reduction in the down payment amounts in the lease agreements in the market, and deals with zero down payment even emerged. This resulted in clients who obtained equipment under these conditions being more prone to defaulting on their repayment obligations.
According to Russia’s RBC, as of July 1, 2024, the leasing investment portfolio reached a record high of 10.8 trillion rubles, a 50% increase compared to 2023. However, the volume of new business in the first half of 2024 decreased by 1%, mainly due to a 23% reduction in business from corporate customers. High interest rates and equipment costs have compelled clients to postpone the renewal of technological equipment. Retail customers might be able to support the market, but their ability to pay is also a concern.
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