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IMS Research Analyst Blog
The Chinese Markets for Low and Medium Voltage Motor Drives are Cooling Down
Date: 26 December 2011
Wilmer Zhou - Market Analyst - Asia Pacific Industry Automation
The Chinese markets for low and medium voltage motor drives have been the fastest growing in the world in the past few years. After growing less than 10% in 2009 because of the financial crisis, the Chinese market for low-voltage drives grew remarkably more than 30% in 2010; it has grown from $1.6 billion in 2007 to $2.6 billion in 2010. The market for medium-voltage motor drives has grown even faster, more than 40% a year from 2007 to 2010, to be worth over $550 million in 2010.
There are several important reasons for such rapid growth in 2010 and the first half of 2011. Many OEMs and end customers delayed their orders in 2008 and 2009. The motor drives demand that had been suppressed, were quickly released in 2010 and early 2011. Moreover, the Chinese Government’s RMB 4000 billion stimulation policy and other policies to boost domestic consumption helped the market to continue to grow. As a result, in the first half of 2011, the markets for low and medium voltage motor drives continued to grow quickly. Even the Japan earthquake did not affect its pace Worrying about shortages of key components shortage and the bad impact on Japanese suppliers of motor drives, many distributors and customers double-ordered; this deepened the anxiety of the market and gave a false impression of industry prosperity.
After June, the situation precipitously worsened. The bad news first came from local small and medium machine builders in South China and East China, many of which had no new orders. Many small companies went bankrupt and were closed. The market for low-voltage motor drives has been most affected, because it is closely tied to the OEM (machine-builder) market.
The situation in the market for medium-voltage motor drives is slightly better, as it is closely related to large-scale projects, which take longer to finish. This means that revenues will continue to come in as the projects progress. In addition, the Government still encourages energy-saving renovation in mines, metal, oil & gas fields, and factories, which helps to keep this market growing.
There are several important reasons for the growth rate falling in the second half year of 2011:
The Chinese Government is carrying out a tight policy to control the rapid growth of real estate prices. The real estate market has close relationship with industries such as HVACs, home appliances, building materials, and metal, which are significantly influenced by the government macroeconomic adjustment and control policies.
The financial crisis of the Eurozone is making global economics uncertain; the export markets for automation products and machinery are both decreasing.
In the past few years, the new energy industry (wind and solar power) grew explosively, resulting in many quality and technology problems. The Government has stopped many projects and regulates the new energy industry.
The influence of the stimulation policy of the past two years is decreasing in the second half of 2011.
Tight monetary policy and strict policies on bank loans has held up many large projects, such as high speed railways, city metros, highways, and factory renovation projects. These policies also cause financial strain from end users to machine builders.
Although the growth rate is falling, we at IMS Research believe the Chinese market for low and medium voltage motor drives will keep steady and grow well in the future. Growth of the low-voltage and medium voltage motor drive markets will be down to around 10% and 15% respectively in 2012. The Chinese government is likely to loosen the tight monetary policy in the near future, because of the economic slowdown and the problem of financing being experienced by the smaller enterprises. In addition, according to the 12th Five-Year plan, the government will speed up progress in energy saving and emissions reduction, and the implementation of the motor-efficiency policy, which will stimulate further growth of the Chinese market for low medium voltage motor drives.
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