Yoonkee Eom, the CEO of Korea Rental Corporation, explains to Euan Youdale how its 9,000-strong fleet of MEWPs is growing in its home market of South Korea and across Asia, where opportunity awaits.
The South Korean rental market is now well-established, although there are some major challenges to be overcome before it becomes truly effective. Rental companies based in the country are also well placed to move into other parts of Asia where there are ripe pickings in the MEWP sector, despite all the hurdles associated with this kind of pioneering work.
Korea Rental Corporation (KRC) is experiencing all of the above. The company was established in 1989, as a subsidiary of Korea Development Leasing Corporation, and was, at the time, focused on leasing equipment. Since the Asian financial crisis, KRC has changed it ownership numerous times and in 2011, its current parent company IS Dongseo, a construction and construction material specialist, took over.
In the same year Yoonkee Eom took the helm at KRC as its CEO, moving over from a senior role at Meryl Lynch. His arrival was to mark a shift in the company’s fortunes as it grew to become one of the top two rental providers in the country, alongside its other offerings. It now boasts a fleet of 9,000 MEWPs across its international network. South Korea has the lion share, at 7,500 units, while Vietnam is next with 1,000, and the Middle East follows with 500. But there have been recent moves into India and The Philippines.
KRC has three business units; the Construction Equipment division, for rental of MEWPs; the Office Equipment division that officially sponsored the 2002 FIFA World Cup that took place in South Korea, and the 2010 G20 Seoul Summit, among other major events. The Test Equipment division is the leading rental supplier of test and measurement instruments in South Korea.
A clue to the size of the company is its annual revenue of US$110 million, a number that has been consistent over the last two years.
Although the company concentrates heavily in MEWP rental, it does provide additional equipment from its depot in Saudi Arabia. That includes 34 cranes - 50 tonne to 100 tonne capacity Groves and Liebherrs, as well as a few boom trucks, wheel loaders, excavators and 10 fork lifts. Nevertheless, the vast majority of the Saudi fleet is made up of its 400 AWPs. Beyond the single Saudi location, to the east of the country, the company has another in Qatar and Kuwait and two in Vietnam, on top of the three in its home nation.
As Eom explains, there are no plans to expand on its equipment offering; In fact, the earthmoving and crane equipment numbers will be reduced. “We hire this equipment with operators and it is very difficult, so we will just concentrate on the AWPs. Also, the reason we have this extra equipment in the Middle East is due to requests from our Korean customers.”
KRC’s client base historically comes from major companies based in South Korea, which embark on projects in other countries. For example, KRC’s presence in Vietnam, its second biggest market outside of South Korea, is the result of Samsung and LG establishing themselves in the country. “Many Korean companies have entered Vietnam as factories were being moved from China to Vietnam. And they ask us to support them with our equipment,” says Eom.
Having followed its customers into Vietnam, KRC stayed there to develop its own customer base. “We have developed the market in Vietnam. And we get a lot of enquiries from local rental companies that want to buy machines from us.”
Indeed, when KRC entered Vietnam in 2013, there were no MEWPs to speak of and the company effectively created the market in the country. “There were a few very small local companies, but they were very small.”
Following the success in Vietnam, would KRC consider entering other Southeast Asia markets, for example Malaysia, which is one of the region’s major MEWP strongholds? First and foremost, Eom replies, the aim in the short-term is to consolidate success in its existing network. However, any reasonable opportunity will be taken into consideration. “We want to do better in the countries that we are in; we want to focus there. Maybe, once we have stabilised all our systems in those countries, then we can move to other countries.”
He reiterates, “The reason we started these overseas projects is because of customer requirements. Firstly, we went to Saudi because Hyundai asked us to supply them with a range of machines, so we bought cranes, forklifts, etc., a US$25 million investment.
“We just follow our customers’ strategy and provide a total rental solution. If there is something that we cannot do, then we cross rent, so that we can provide everything they need – that is our strategy.” Then, if the market requires it, “We localise.”
It stands to reason that KRC would happily enter other global markets too, if its customers had reason to set up projects there. Under those circumstances, opportunities have been found in India and The Philippines. Concerning the latter, KRC supplied MEWPs to a single project carried out by Samsung Electro-Mechanics, around a year ago, but pulled out, rather than staying on after the project.
On the subject of India, the company is there now, with MEWPs that it is providing for a new Samsung factory. As a side note, South Korean president Moon Jae-in attended a completion ceremony for the factory. The decision to set up in a country, once its customer’s project is complete, boils down to KRC’s ability to localise effectively, and fit in for one reason or another.
“We will decide what to do there once the project is over. But the Indian market is a very difficult one – even more so than China, with an unfamiliar culture. Plus, they are focused on used machines. So, they are really more a selling market for us,” adds Eom.
When it comes to China, the difficulties may be outweighed by the potential. “Over the last three years we have considered entering the Chinese market, as Korea and China are close to each other. And we have many good technologies and branches already there for test and measurement instruments. “But the situation is not good, for a number of reasons, including the payment issue, etc. We have been watching the market but we have not decided yet.”
There may only be one real solution to approaching some markets, adds Eom, and that is to find a partner. “To enter China, you really need to merge with another company. There is big potential, with rapid growth, but it is a tough market and we cannot enter it by ourselves.”
Wherever it goes, one of KRC’s key commitments is to provide young equipment; around 90% of its current fleet has been bought new. It was a strategy adopted by Eom when he joined the company. “Up to 2011, we bought used machines but after that we have only bought new.”
Asked if KRC adjusted its rental rates to pay for the new fleet, Eom replies in the negative. “They stayed the same,” he said. “And compared to 2011, rental rates are 30% down in the country. Actually, in 2011 rental rates were very high due to less competition and high demand.”
The situation has changed considerably. “In the first three years since then, the Korean AWP market by fleet size grew 60%, and KRC increased its fleet by 130%.”
KRC will continue in this vein, amounting to an annual US$20 million in MEWP investment over the next five years, bringing the fleet up to around 13,000 units. Scissor lifts represent 90% of the fleet, while booms make up the 10% remainder. “This will change a little; we want to increase the number of booms.”
This places KRC as the second biggest rental company of MEWPs in South Korea. Its main competitor AJ Networks is a similar-size and, says Eom, has a similar business model.
KRC’s fleet is predominantly made up of Genie machines, accounting for 50%, followed by JLG, about 30%, and Skyjack, 15%, plus others for more specialised equipment. Those who know the Korean market will remember that Skyjack is historically very strong there as it was the first MEWP manufacturer to enter the country. Then, as Eom explains, Genie launched Genie Korea, then JLG moved in.
This fleet mix may change in the future, says Eom. “We have not decided yet, but we are thinking of concentrating on one or two brands. “We have branches in different countries, so we need a global service.”
At the moment that will not include any Chinese brands, says the company, however, the situation could change, he says, particularly if KRC enters China. “We have to take into consideration total cost of ownership. If we buy a machine new and get the complete service provision from the manufacturer with it, the total cost is less than buying a used machine in the first place.”
Eom believes there are now around 55,000 units in South Korea, and that figure is set to grow significantly. “In Korea, AWPs are only now found on construction sites. The other areas like maintenance, etc., are growing. “We have been watching and are trying to develop these new markets,” adds Eom. “That’s why we want to buy more booms and a broader range like low level access and specialist equipment, for instance, rail mounted products and tracked platforms.
Industries that had fallen away are also showing signs of resurgence. “In the past the shipbuilding market was very high, then it went down. But it is now rebounding, so we want big booms for that.”
In addition, the culture of the South Korea MEWP market is undergoing a transformation. “The atmosphere is changing. Five years ago, the market was very big and end users bought their own equipment - hundreds of booms at a time. Now, they realise that this is risky. And now that the industry conditions are improving, people want to rent long term, not buy.”
And, there is another dimension to the Korean market - it has a large MEWP population but no central standards or regulations. There are coverall lifting equipment regulations, including cranes and other equipment, but nothing specific to MEWPs.
Instead, each prime contractor, for example Samsung and LG, has its own internal standards specifically for working at height, which KRC has dubbed the ‘Samsung Standard’ or ‘LG Standard’, for example. It means the company must provide a great deal of customisation for each major customer, which increases complexity and cost.
As a market leader, KRC is taking the initiative to change the culture of the rental market, and not just in terms of commonality of product. “We believe that operator training is more important than the machine itself. The machine is already built in a safe way.”
Korean Rental Corp. is an IPAF member and has an IPAF training centre – the first one in Korea. The company is also working closely with the Korea Safety and Health Association (KSHA) and has approached the safety division of a major contractor, with an offer to take care of its safety orientation and training. “In Korea we have a lot of daily workers. It means contractors often have a headache when training them because they don’t know how to operate the machine themselves.”
To this end, KRC hosted an open house at one of its facilities for the contractor just mentioned. “It went really well and they then asked us to provide training at all their sites. We are now using that as our reference for other customers and, from here, we will try to change the market. “We are focused on safety and efficiency. Safety is very important but efficiency is also very important.”