Machinery Manufacturers Restricting Service for Used Machines – Ethical or Strategic?

In some markets, machinery manufacturers adopt a policy where service or spare parts support is restricted if ownership changes.

Such policies may be presented as brand protection or quality control measures.

But the larger question is — what is the long-term impact on new machine buyers and the banking system?

Let us look at this issue from a broader industry perspective.

When a mill invests in a new machine, they calculate:

• Production capacity
• Quality improvement
• Energy efficiency
• Labor saving
• Payback period
• Residual value after 10–15 years
  

Residual value is very important.

Every new machine buyer knows that after some years:

• Technology may change.
• Market conditions may change.
• Financial restructuring may be required.
• Expansion or exit may occur.
  

At that time, the resale market gives security.

If service support becomes uncertain in the secondary market:

• Future resale value becomes doubtful.
• Asset liquidity reduces.
• Risk perception increases.
  

This directly affects the confidence of new buyers.

A machine is not only a production tool.

It is also a financial asset.

If that asset cannot be freely traded:

• Balance sheet strength reduces
• Depreciation planning becomes weak
• Long-term investment decisions get delayed
  

Now let us see from the bank’s perspective.

Banks evaluate machinery loans based on:

• Asset market value
• Demand in secondary market
• Ease of liquidation
• Brand strength
• Service continuity
  

If there is fear that machines may not get service in future ownership:

• Liquidation risk increases.
• Collateral value becomes uncertain.
• Credit risk rating may change.
  

No banker will be comfortable lending large capital for an asset that cannot be easily sold in open market.

Banks should prefer:

• Assets with clear resale visibility
• Machines with uninterrupted service support
• Brands with transparent lifecycle policies
• Strong secondary market demand
• Stable spare parts availability
• Predictable maintenance ecosystem
• Clear transfer-of-ownership guidelines
• Fair and non-discriminatory service framework
  

Because for banks:

• Liquidity reduces risk
• Predictability improves credit confidence
• Market acceptance protects collateral value
• In the end, banks should fund stability — not uncertainty.
  

This discussion is not emotional.

It is about long-term sustainability.

Is It Legal for Brands to Keep Banks at Risk?

This is a sensitive and important question.

In general:

• A manufacturer has the right to decide its commercial policies
• Service terms can be contract-based
• Warranty conditions can be clearly defined
  

But legality depends on how the policy is structured.

If a company:

• Openly declares its service policy in advance
• Applies it uniformly to all customers
• Does not misuse dominant market position
• Does not create unfair trade barriers
  

Then it may be considered a commercial decision.

However, if a dominant player:

• Uses market power to indirectly restrict resale
• Creates artificial barriers in secondary market
• Discriminates between owners without technical justification
• Distorts fair competition
  

Then regulators may examine whether it becomes anti-competitive conduct.

In India, competition-related concerns are generally examined by the Competition Commission of India (CCI).

From a banking perspective:

• Banks assess risk independently
• Loan agreements are between bank and borrower
• OEM is not directly responsible for loan repayment
  

So legally, the lending risk remains with:

• The borrower
• The financing bank
  

But practically:

• Ecosystem behaviour influences financial risk
• Policy uncertainty affects asset value
• Asset value affects credit exposure
  

The larger issue may not always be legality.

It may be about:

• Fair market conduct
• Responsible industry behaviour
• Long-term sustainability
  

Strong brands protect their commercial interest.

Stronger brands protect the entire ecosystem.

Strong brands create confidence across the full lifecycle of the machine — from first buyer to last owner.

The real question is:

Does restriction increase long-term brand value? Or does trust build stronger markets?

AUTHOR BIO:

With over 30 years of experience in the textile industry and industrial automation, Mr. Sathyanandan brings deep domain expertise in spinning operations, automation, and textile machinery. He has led business units, launched innovative solutions, and driven growth across domestic and international markets, now bringing a data-driven approach to manufacturing and product development.

Sathyanandan Prabakaran — General Manager — Sales, Texcoms Worldwide