Controlling Costs Through Pre-Owned Solutions

Israel based supplier of pre-owned tyre and rubber industry machinery Pelmar Engineering Ltd. recently announced its Group Board has nominated Hagai Peled to take over the role of managing director, a position he commences following “five years of successful management positions in various departments.” In February the son of company founder Jacob Peled visited Germany to attend both the Tire Technology Expo and a meeting of Pelmar Engineering managers from around the world. During the exhibition he gave an overview of Pelmar’s global business and the options it provides for tyre businesses wishing to set up or expand.

“I am not familiar with any tyre or rubber manufacturer that does not utilise used machinery, whether their own or someone else’s,” says Hagai Peled in his opening comments. The market for pre-owned tyre manufacturing equipment, he adds, is as old as the tyre itself. Today, even large manufacturers re-condition equipment and move it from plant to plant as needs dictate. “This can be done as the machinery is built to last.”

The cost advantage offered by buying pre-owned machinery is significant, as Peled outlines: The price paid for ‘as is’ machinery is only a maximum of 30 per cent the cost of a new machine. Refurbished equipment typically comes with a price tag some 35 to 40 per cent compared with new, while fully reconditions machines usually cost around 70 to 75 per cent the price of a new equivalent. Furthermore, customers in the market for a pre-owned piece of equipment can usually find an item available for immediate delivery, sparing them the waiting period of eight to 18 months often associated with the purchase of new machinery. On the minus side, Peled admits, ‘as is’ pre-owned equipment is shipped without warranty, and often only a limited warranty is attached to refurbished items.

With the advantages of pre-owned machinery clearly outweighing the disadvantages, it is no surprise that Pelmar Engineering has sold equipment to customers in all parts of the world. According to Peled, a large market for pre-owned machinery exists in almost every country. European sales account for 24 per cent of Pelmar’s business, India 21 per cent, Eastern Europe and the Middle East nine per cent each, the USA five per cent, China four per cent and other countries 28 per cent. Peled explains the reason behind the high concentration of sales in Europe and India: “Pre-owned equipment requires specialised installation. In Europe and India there is much engineering knowledge, therefore this machinery is popular and in demand.”

The Pelmar Engineering managing director adds that South America, South Africa and Southeast Asia are growing markets, although “some government regulations are tough” in these regions. Demand in the USA has almost stopped as a result of the recession, and sales to China present their own unique situation. “In China it is often the case that used machines are imported and then copied,” Peled elaborates.

While our Western mentality has for many years dictated that ‘new is better’, environmental concerns and an uncertain economic climate have prompted many to reconsider this point of view. As Hagai Peled points out, the changes that have taken place in the tyre production process in recent years are small. The main changes are linked to increased efficiency, such as reduced electricity consumption. The machinery itself thus remains fit for purpose, and often the manufacturers of new machinery admit their equipment is capable of serving for another twenty, thirty or forty years. And this pre-owned machinery can be upgraded to bring its specifications in line with current levels. “Following reconditioning the cost of a machine should not exceed 70 per cent of the new price, but with a warranty like a new product,” Peled adds.

Most customers purchasing used machinery are those not in a position to buy new machines, reports Peled, therefore this represents a big market in India and Asia. “Used and reconditioned equipment gives them access to a manufacturer’s quality and technology. If these tyre makers are successful, they often buy new equipment from the manufacturer at a later date.”

Pelmar Engineering deals not only in individual units; the company can deliver complete tyre manufacturing plants for the passenger car, truck and bus, agricultural and OTR sectors. One turnkey agricultural tyre facility Hagai Peled used as an example was set up with an investment in machinery approximately 50 per cent of that required for an equivalent plant using new machinery. The company can also supply equipment for tyre recycling plus precure and mould cure retreading.