Sharing of Heavy Equipment

Abstract

Technological advances enable new business models for heavy equipment manufacturers, replacing or augmenting ownership-based models with access-based consumption. An ever-increasing list of peer-to-peer sharing platforms (e.g., Trringo by Mahindra, Yard Club by Caterpillar, or COOP by Ryder) shows that it is paramount for decision-makers to understand the economic implications of such business models. However, in this changing landscape, the efficacy of relying on access-based consumption is unclear, and a lack of empirical performance data motivates the need for analytical insights. This study seeks to understand the performance of different emerging business models, particularly peer-to-peer product sharing models, by considering salient economic and operational factors in the context of heavy equipment. Although such sharing business models are widely publicized, the optimal model for a heavy equipment manufacturer will depend on operational factors linked to after-sales services, a point which has been previously overlooked and which deserves closer attention from decision-makers. We determine the threshold at which a heavy equipment manufacturer may prefer setting up a sharing platform for its products, which provides support for the emergence of such manufacturer-owned platforms in practice. We also describe the optimal design of a sharing platform, highlighting the need to subsidize one part of the business (sharing) in order to benefit another (after-sales services). Moreover, we provide insight into how manufacturers can leverage after-sales services when threatened by the entrance of a third-party sharing platform.

Keywords: Sharing Economy, After-sales Services, Heavy Equipment, Business Model Innovation