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IMS Research Analyst Blog
Industrial Motors and Drives Markets Poised for Strong Growth in 2011
Date: 29 June 2011
Alex Chausovsky, Research Director - Electric Motors Group
This article was written for eDrive Magazine's 2011 Resource Guide (http://www.e-driveonline.com).
The global markets for industrial motors and drives, valued at an estimated $26.0 billion in 2010 according to the latest data from IMS Research, had mixed performances during the year but are all poised for growth in 2011. The difference in the performance of individual product markets can be attributed to the fact that sales of low voltage motors and drives are heavily dependent on demand for machinery, while sales of medium voltage motors and drives rely mainly on the performance of large process industries and the amount of capital investment occurring in these sectors. Because worldwide machinery production grew more than 15% during 2010, the markets for low voltage motors and drives witnessed robust double-digit growth compared to 2009 levels. In contrast, 2010 was a down year for the medium voltage motor and drive markets, as many large projects continued to face significant financial difficulties, and the recovery of process industries occurred much slower than that of the discrete sectors.
After several years of healthy growth, the low voltage AC motors market declined by 21.1% in 2009 to just over $9.0 billion. Although the market decline was globalized, the overall Americas, Asia Pacific and EMEA regional motor markets experienced different rates of contraction, while the Chinese and Indian motor markets continued to grow during the recession. Motor manufacturers in North America began to report signs of recovery beginning in 4Q09, while many European motor suppliers did not report improvement until well into 2010. IMS Research believes that the world market for low voltage AC motors was worth approximately $10.2 billion in 2010, with more than 34.7 million units shipped during the year. This means that revenue growth was 12.8%, and the markets recovered about half of the losses caused by the recession. Driven by various motor efficiency legislations being enacted around the world (Fig 1), the low voltage AC motors market is forecast to surpass pre-recession levels in 2011. Furthermore, the medium-term forecast projects that by 2014 revenues for the total low voltage AC motors market will more than double 2009 levels, with average revenue growth of 16.6% per year.
In 2010, IE1 (Standard Efficiency) motors accounted for more than 55% of the market’s revenues. These products were sold mainly in the EMEA, Asia Pacific and South American markets. IE2 (High Efficiency) motors represented nearly 39% of market revenues during the year, and the main market for these motors was in North America. IE3 (Premium Efficiency) motors accounted for about 3% of global revenues, while squirrel-cage PM motors represented approximately 1% of global low voltage AC motor revenues. The efficiency breakdown of the low voltage AC motors market is forecast to be very different by 2014, with IE1 motors comprising less than 18% of total revenues, while the IE2 and IE3 motors make up the majority of the market with respective shares of 57% and 21% (Fig 2). Although sales of squirrel-cage PM motors are expected to grow faster than the overall market, rare-earth magnet price and supply concerns are expected to persist, and these motors are still expected to account for less than 2% of the market by 2014.
In contrast to the low voltage motors market, sales of medium voltage motors grew in 2009 but were down significantly in 2010, with revenues contracting by more than 25% to about $4.0 billion and unit shipments falling to just over 30,000. This market is a mature and stable one, and its performance is driven by several key factors including prices of commodities (such as oil, natural gas, metals, and other minerals), the availability of financing for large projects, and the amount of CapEx investment by the industries that use these motors. The main reason the downturn affected this market in 2010 rather than 2009 is attributed to long production times and full order books that most suppliers had in place before the recession started. Once the order backlog had been cleared, and with a significantly lower number of new orders coming in, the market felt the full brunt of the downturn in 2010. However, rapid increases in commodity prices over the past year, coupled with a lending environment that is much more positive than it was in 2009 and early 2010, greatly raise expectations for a rebound in this market in 2011. Assuming the economic recovery remains on track and commodity prices remain around current levels, the outlook for the medium voltage motors market remains bright, with some companies expecting a return to double-digit growth as early as 2012.
Similar to low voltage AC motors, the world market for low voltage AC & DC motor drives also contracted in 2009 but performed very well in 2010, mainly due to notable growth in machinery production during the year. Total 2010 revenues were estimated to be $9.9 billion (Fig 3), which represents a 13.0% growth from 2009 levels, while total unit shipments were estimated to be 16.4 million. In 2009, there was a product mix shift from standard and premium drives to compact drives. The shift occurred as a result of customers’ increased price sensitivity due to the downturn, coupled with increased functionality of compact drives allowing them to be used in more applications. This higher functionality coupled with lower selling prices encouraged many customers to substitute compact drives for standard and premium ones when possible. In 2010 this trend persisted, but there was a definite recovery in sales of standard and premium drives, particularly in the second half of the year.
From a future growth perspective, the two most important industry sectors in the low voltage motor drives market are renewable energy and commercial HVAC. Renewable energy is one of the few sectors that did not decline in 2009, and is predicted to grow by an average annual growth rate of 14.6% in terms of revenues through 2014. Commercial HVAC machinery is also predicted to perform well during the forecast period due to the tremendous energy savings that can be achieved by implementing drives in this equipment. The sectors revenues are predicted to grow by an average annual rate of 18.0% over the forecast period. Sales of drives into food, beverage & tobacco machinery are also forecast to perform well as ongoing urbanization and population growth continues to drive the world’s demand for processed foods and beverages; this market sector is forecast to grow by 14.4% in terms of revenues from 2009 to 2014.
The low voltage AC & DC drives market is also expected to benefit from legislation in the EU that established minimum motor efficiency requirements as a result of the ErP directive. Beginning in 2015, the mandate requires the use of either an IE3 efficiency motor or an IE2 efficiency motor coupled with a drive. IMS Research believes that many customers will chose the IE2+drive option, which will act as a boon for the drives market for years to come.
The market for medium voltage drives follows a similar pattern to the medium voltage motors market. IMS Research believes that this market’s revenues grew by less than 1% in 2009, and the full effects of the downturn were felt in 2010, when revenues are believed to have contracted by more than 16% to just over $1.8 billion (Fig 3). Once again, the delay is attributed to significant lag between bookings and billings, which resulted from full order books prior to the recession and long production times for these complex and technically advanced drives. The market contraction was caused in large part by severe order declines in the metals, mining, marine, and cement industries. Together these four sectors account for more than half of all medium voltage drive revenues. Sales to the power generation and water & wastewater sectors are the only ones that grew in 2010, driven by population growth, increased urbanization, and infrastructure expansion in developing regions.
China is by far the largest regional market for medium voltage drives, accounting for an estimated 45% of revenues in 2010. Growth of the Chinese market has been remarkable over the past few years, and while it is expected to slow substantially in the future, it is still projected to outperform the global market through 2014. The average selling prices of medium voltage drives in China are much lower than the global average because of intense price competition and the prevalence of lower power medium voltage drive products. The US and Western European medium voltage motor drive markets are also substantial, with the US accounting for more than 14% of total market revenues, and Western Europe comprising another 9%.
In conclusion, while 2010 featured mixed performances by the low voltage and medium voltage motors and drives markets, 2011 is poised to be a year of growth for all product types. Machinery production is expected to remain at healthy levels, while large projects in many process industries, particularly in the oil & gas sector, are also expected to do very well this year. This will present many opportunities for suppliers of both low voltage and medium voltage motors and drives, and supports the expectations that these markets will surpass their pre-recession levels this year.