China rental must modernise to expand

Lawrence Poh, CEO of Lei Shing Hong forecasts exponential growth in the Chinese rental market but says there are many challenges that must be overcome first.

He made the comments at the International Rental Conference Asia, organised by KHL's IRN, taking place today in Shanghai, China.

Le Shing Hong is the biggest Caterpillar dealer in China and has had an annual revenue of more than $1 billion over the last three years, which is set to increase this year, said Mr Poh.

The company also has a rental wing which has made losses since its formation 10 years ago.

Reasons for the losses have included a lack of strong leadership, the wrong product mix, underestimated cost of logistics, missed payments from customers, as well as a lack of acceptance in the rental industry and fierce competition from small local players.

"It's not any easy journey. But I take a long term views - if you are going to be a rental company is China you have to take the long term view."

Mr Poh added that the rental sector will take about 10 years to get going properly.

In response, the company has developed a scheme to retain and train key staff as there is a severe lack of relevant skills in the country.

"All our rental is wet rental, we need operators but there is an acute shortage," Mr Poh explains.

The company's strategy is to create one stop local rental depots, cooperate with other rental players and to have a strong relationship with manufacturers.

"If manufacturers and rental companies see rental as a strategy they should form long term partnerships," said. Mr Poh.

Rental companies must also have a lean operation to survive and introduce easier ways to book equipment like online ordering systems, he said.

Overall the rental sector must become more professional and sophisticated and include the introduction of a rental association. In addition a more supportive tax structure tailored to rental is required, continued Me Poh. "All players in this market must see rental as something we can grow together."