Custom Truck One Source, Inc. (CTOS): 5 FORCES Analysis [Nov-2025 Updated]

You're digging into the competitive landscape for Custom Truck One Source, Inc. (CTOS) as of late 2025, trying to map out where the real value is protected. Honestly, the story here is a classic industrial tug-of-war: strong, sustained infrastructure demand is definitely empowering their specialized suppliers, but Custom Truck One Source, Inc. (CTOS) has built significant customer stickiness through its one-stop-shop model, making it costly for customers to leave. The biggest defensive wall, however, is the massive capital required-think needing a national network and a fleet exceeding 10,000 specialized units-which keeps new competition at bay. Read on to see the full breakdown of the five forces shaping this business right now.

Custom Truck One Source, Inc. (CTOS) - Porter's Five Forces: Bargaining power of suppliers

You're analyzing Custom Truck One Source, Inc.'s (CTOS) supplier dynamics as of late 2025. The power held by those supplying chassis and the specialized vocational attachments is a key lever in your valuation model. Here's the breakdown of what the numbers suggest about supplier leverage right now.

Suppliers of chassis and attachments are specialized.

While the supply chain has largely normalized from the severe constraints seen in late 2022 and early 2023, the specialized nature of vocational truck bodies and custom chassis still grants suppliers some pricing influence. The CEO noted that on the attachment side, the focus remains on working closely with suppliers to ensure visibility is improved. This suggests a reliance on a select group for those value-added components.

Strong demand for vocational vehicles increases supplier leverage.

The market backdrop is certainly supportive of supplier pricing power. The vocational truck market itself was projected to be a $62.04 billion industry in 2025. Custom Truck One Source, Inc. saw signed orders increase by 30% year-over-year in the quarter ending September 30, 2025. That robust demand, fueled by secular tailwinds like utility grid upgrades, keeps the order books full for manufacturers. The Truck and Equipment Sales (TES) segment revenue still grew 6.0% in Q3 2025 compared to the prior year.

Here's a quick look at the demand environment supporting supplier pricing:

Custom Truck One Source's scale helps manage supply chain costs.

Custom Truck One Source, Inc.'s sheer size helps temper supplier power through volume commitments and inventory management. The company ended 2024 having reduced inventory by more than $150 million, which positioned them well for 2025 working capital goals. They are targeting $50 million to $100 million in levered free cash flow generation for 2025, partly through continued inventory management. The total Equipment on Rent (OEC) was over $1.2 billion in Q2 2025. That scale is definitely a negotiating tool.

Long-term relationships with key suppliers mitigate power.

Proactive management is key here. Custom Truck One Source, Inc. stated they have 'great relationships with our chassis suppliers'. They used these relationships to pull forward chassis purchases ahead of potential tariff impacts. This suggests a history of collaboration that buys them lead time and cost advantages over smaller competitors.

• Proactive chassis inventory pulls executed.
• Focus on improving visibility with attachment suppliers.
• Relationships helped navigate past supply chain issues.
• Scale allows for volume-based negotiations.

Tariff policy changes create volatility in input costs.

Regulatory uncertainty, specifically around tariffs, introduces a cost volatility risk. The company's exposure is primarily for product coming in from Canada and Mexico, mainly chassis. Management indicated that any resulting cost impact from tariffs would be seen in Q3 and Q4 of 2025. This timing means input costs are definitely a near-term variable to watch, even if the supply chain has otherwise normalized.

As of September 30, 2025, total debt outstanding was $1,666.4 million. Finance: draft 13-week cash view by Friday.

Custom Truck One Source, Inc. (CTOS) - Porter's Five Forces: Bargaining power of customers

When looking at the bargaining power of customers for Custom Truck One Source, Inc. (CTOS), you need to weigh the scale of their operations against the fragmentation of their client base and the stickiness of their service model. Honestly, the power here is a mixed bag, leaning toward moderate pressure, but with some strong structural advantages for CTOS.

The sheer scale of Custom Truck One Source, Inc. (CTOS) suggests a broad customer base, which generally dilutes the power of any single buyer. While a precise customer count isn't readily available in the latest reports, the company manages a coast-to-coast rental fleet of more than 10,350 units. This fleet supports critical infrastructure assets, including electric lines and telecommunications networks. The business is clearly not reliant on a handful of massive contracts, which is a good defensive posture against buyer power.

However, the customer base is not entirely uniform. You have large, key accounts, likely in the utility and telecom sectors, whose sustained demand is expected to drive growth. These large clients certainly command attention for volume-based pricing. To be fair, the company noted that signed orders were up 30% year-over-year, with growth of more than 40% specifically among their local and regional accounts, suggesting a healthy, fragmented demand pool.

The one-stop-shop model is a key lever Custom Truck One Source, Inc. (CTOS) uses to increase switching costs. When a customer needs sales, rental, service, parts, and tools, moving to a competitor means fragmenting their entire procurement and maintenance workflow. This complexity raises the Total Cost of Ownership (TCO) for the buyer if they switch. Furthermore, the company has actively worked to increase transparency, which can be a double-edged sword. The New Customer Portal includes a Contract Price Visibility feature, giving customers a clear view of the actual costs associated with their rental, part, or tool requirements. This transparency helps customers budget but also arms them with data to negotiate future rates.

Here's a quick view of the financial context that frames customer negotiations as of late 2025:

The power dynamic is further defined by the specific nature of the customer relationship and the services offered:

• Customers are fragmented local and regional entities, plus large key accounts.
• Large utility and telecom clients command volume discounts.
• New Customer Portal offers contract price visibility, increasing transparency.
• High switching costs due to the one-stop-shop model (sales, rental, service).

The ability of Custom Truck One Source, Inc. (CTOS) to bundle services-rental, parts, tools-is what locks in customers. If a customer only needed a crane rental, their power would be higher. But needing the associated parts and maintenance from the same provider definitely raises the friction to switch vendors. Finance: draft the Q4 2025 cash flow forecast incorporating the Q3 revenue run-rate by next Tuesday.

Custom Truck One Source, Inc. (CTOS) - Porter's Five Forces: Competitive rivalry

You're looking at a market where scale and specialization are duking it out for dominance. The competitive rivalry facing Custom Truck One Source, Inc. (CTOS) is definitely shaped by a mix of large national players and smaller, regional specialists. It's not a simple head-to-head fight; it's a battle across multiple fronts: rental, sales, and service.

The market is fragmented, but the big guys are making big moves into the specialty space. For instance, industry giant Herc Rentals noted that its specialty business represented 24% of its total $6.9 billion fleet in Q1 2025. Also, United Rentals saw its specialty division revenue increase 22% year-over-year in Q1 2025, and they are planning to open at least 50 more specialty locations in 2025. This shows that major competitors like Herc and WillScot are aggressively competing in the broader specialty rental space, which directly overlaps with Custom Truck One Source, Inc. (CTOS)'s core business.

Custom Truck One Source, Inc. (CTOS)'s key advantage here is its differentiation via the full lifecycle one-stop-shop model. This model integrates several revenue streams, which helps insulate it somewhat from pure rental price wars. Here's a look at the revenue mix from Q1 2025:

• Equipment Sales: $274 million
• Parts and Services: $116 million
• Rental Revenue: $32 million

The rivalry is certainly intense in the rental segment, which is a core driver of utilization and fleet value. Custom Truck One Source, Inc. (CTOS) reported its rental fleet OEC (Original Equipment Cost) on rent reached a record $1.6 billion at the end of Q2 2025, with utilization nearing 78% for that quarter. By Q3 2025, the average OEC on rent was up 17% year-over-year, and fleet utilization hit 79.3%. This scale of fleet investment signals the high capital requirements and the competitive nature of maintaining and growing a high-value rental fleet.

The intensity is also reflected in the sheer size of the capital deployed. While the prompt mentioned an OEC context of $1.55 billion, Custom Truck One Source, Inc. (CTOS)'s own rental fleet OEC on rent was reported at more than $1.2 billion in Q2 2025, growing to a $180 million increase year-over-year in Q3 2025. This level of investment by Custom Truck One Source, Inc. (CTOS) alone suggests significant rivalry pressure to keep assets utilized at high rates.

The industry is inherently cyclical, tied directly to infrastructure and maintenance spending, which is a major factor in rivalry intensity. You can see this linkage clearly in Custom Truck One Source, Inc. (CTOS)'s end-market exposure, which dictates where competitors are also focusing their efforts:

The broader economic environment in 2025 is certainly fueling some of this activity; for example, the United States government allocated a massive amount of $12+ billion in civil projects to improve infrastructure this year. Still, the overall equipment rental market is projected to grow 5.7% in 2025 to nearly $82.6 billion, which suggests that while the pie is growing, the fight for market share within the specialty segment remains fierce, especially as utilization rates are returning to more typical levels after the overheated conditions of 2023.

Finance: draft a sensitivity analysis on the impact of a 10% drop in utilization across the ERS segment by Q1 2026 by Friday.

Custom Truck One Source, Inc. (CTOS) - Porter\'s Five Forces: Threat of substitutes

The threat of substitutes for Custom Truck One Source, Inc. (CTOS) is moderated by the highly specialized nature of its core offerings, though alternatives exist in specific service and equipment categories.

Low threat from general-purpose equipment due to specialization (e.g., digger derricks).

The value proposition of Custom Truck One Source, Inc. centers on vocational equipment tailored for infrastructure work, such as electric utility transmission and distribution (T&D), telecom, and rail. This specialization inherently raises the barrier for general-purpose equipment to serve as a direct substitute for many core rental and sales needs. The company's full-year 2025 revenue guidance reflects the scale of its specialized segments:

For context, the third quarter of 2025 saw ERS rental revenue grow 17.4% year-over-year, with average fleet utilization exceeding 79%, showing strong demand for specialized rental assets that general equipment cannot easily replace.

Customers can choose to buy non-specialized trucks and customize them in-house.

While a customer could theoretically purchase a standard truck chassis and attempt in-house modification or customization, this route introduces significant internal costs, time delays, and potential compliance/safety risks associated with engineering and fabrication. Custom Truck One Source, Inc.'s integrated production capabilities, which feed the TES segment, offer a ready-made, compliant solution, reducing the incentive for this substitution.

Rental (ERS) and Sales (TES) segments offer a direct alternative to each other.

Within Custom Truck One Source, Inc. itself, customers have a choice between renting equipment via the ERS segment or purchasing it via the TES segment, which is a form of substitution that the company manages internally. For instance, in Q3 2025, the TES segment revenue grew 6.0% year-over-year, while ERS rental revenue grew 17.4% year-over-year, indicating a dynamic where customers are choosing one over the other based on project duration or capital availability. Still, the TES backlog was down 29% compared to Q3 2024, suggesting a shift in preference toward the rental model for some customers in that quarter.

Substitutes for aftermarket service (APS) exist via independent repair shops.

The APS segment, which saw total revenue increase 3.0% in the three months ended September 30, 2025, competes with independent, third-party repair facilities. These independent shops can offer lower labor rates or faster turnaround times for routine maintenance or repairs, acting as a direct substitute for Custom Truck One Source, Inc.'s own service offerings. The threat is present, though the company's full-service model aims to counter this.

The full service offering reduces incentive to use fragmented alternatives.

Custom Truck One Source, Inc. markets a 'one-stop-shop' business model, integrating rental, sales, and aftermarket service. This integrated approach is designed to lock in customers by offering end-to-end solutions. You see this benefit in the ERS segment, where high utilization of 79.3% in Q3 2025 suggests customers are relying on the readily available, serviced fleet rather than piecing together solutions from fragmented providers.

• ERS utilization: 79.3% (Q3 2025)
• APS Q3 2025 revenue growth: 3.0% (3-month)
• TES Q3 2025 revenue growth: 6.0% (YoY)
• ERS Q3 2025 rental revenue growth: 17.4% (YoY)

Custom Truck One Source, Inc. (CTOS) - Porter's Five Forces: Threat of new entrants

High capital investment required for a competitive rental fleet (over 10,350 units).

The Operational Equipment Count (OEC) on rent for Custom Truck One Source, Inc. ended Q1 2025 at $1.55 billion. Net rental Capital Expenditure (CapEx) in Q1 2025 was $60 million. Full-year 2025 guidance for net rental CapEx is just under $200 million. Custom Truck One Source, Inc. expects to invest up to an additional net $50 million in its rental fleet in the third quarter of 2025 compared to previous guidance, targeting at least high-single digit fleet growth based on net OEC.

Need for a national network of over 40 locations creates a major barrier.

Custom Truck One Source, Inc. operates with over 40 locations across the U.S. and Canada. The rental fleet consists of more than 10,000 units as of Q2 2025.

Established supplier relationships are critical and hard to replicate.

Regulatory compliance for specialized equipment is complex and costly.

Custom Truck One Source, Inc. continues to monitor potential changes to chassis emission regulations from CARB and the EPA.

Economies of scale and scope are significant in customization and service.

The Equipment Rental Solutions (ERS) segment saw average OEC on rent increase by 17% year-over-year in Q3 2025.

• Q1 2025 Revenue: $422 million.
• Q1 2025 Adjusted EBITDA: $73 million.
• Q3 2025 Net Loss decreased by 66.9% to $5.8 million compared to the previous year.