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Falling drives prices are hitting margins

02 April, 2012

Prices of variable speed drives (VSDs) are dropping by about 3% per year, affecting the profit margins of suppliers, says a new report from Frost & Sullivan looking at the market for VSDs in the European food and beverage (F&B) sector.

The report predicts that drives sales to this sector will rise from €205m in 2010 to €313m by 2017, but adds that this growth will result in increasing competition. With more than 100 drives manufacturers fighting for business, there is relentless price pressure, resulting in eroding profit margins.

“Small participants face challenges like sizeable labour costs, eroding profit margins and industry consolidation,” says Frost & Sullivan research analyst, Raaj Thilak Raveendran. To succeed in the highly competitive market, manufacturers will need to expand their product ranges or identify new applications for their existing products.

VSDs account for almost two-thirds of the energy consumed in the F&B industry, Frost reports. And as energy prices have surged, energy-efficient drives have helped manufacturers to cut their production costs, improve their ROI (return on investment) and lower their CO2 emissions.

“The F&B industry is becoming completely automated, resulting in increased power consumption during the production process,” says Raveendran. “Companies are also looking to reduce their energy usage by implementing energy-efficient drive technology. Although expensive, energy-efficient drives provide high ROI and reduce operating costs – two advantages that will boost their uptake over the forecast period.”

An important trend is the growing interest of OEMs in decentralised drive systems, due to their lower costs and shorter project planning times. Frost reports that drive manufacturers are planning to launch new products in this segment, which will boost the sales of decentralised drives in the short and medium term.

“Ease-of-use and cost efficiency are the two main advantages of electric drives in comparison to rival technologies,” concludes Raveendran. “Due to these advantages, electric drives have been able to find new applications. To sustain market momentum, manufacturers need to provide a complete range of products that suit the application requirements of both OEMs and end-users.”

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