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Global drives sales decline as EMEA market shrinks

24 October, 2012

Global sales of low-voltage motor drives were 9% lower in the first half of 2012 than during the same period in 2011, according to a new analysis by IMS Research. It expects drives sales in the EMEA (Europe, Middle East and Africa) region to shrink by a single-digit rate during 2012, although it adds that both the EMEA and Asian markets have expanded during the second half of 2012.

IMS predicts that global sales of LV drives will grow by just 2.6% during 2012 – to reach $12.4bn – compared to 15.3% in 2011, making 2012 the first year that sales have grown at single-digit rates, outside of the recent global recession. It reports that the global market for LV AC and DC drives grew from $10.5bn in 2010 to more than $12bn in 2011.

The slowdown in the drives market is linked to a decline in global machinery production, which is expected to grow by just 7% in 2012, compared to 12.4% in 2011. This decline will continue into 2013, with IMS forecasting that machinery production will expand by just 5.7% next year.
“Over the last few years, the majority of the increase in motor drive sales came from Asia, while the Americas grew at a slower rate,” comments IMS research analyst, Rolando Campos. “EMEA motor drive sales by contrast, have not returned to pre-recession levels.

“In EMEA,” he adds, “an economically weaker southern Europe has resulted in lower drive sales through the second quarter of 2012.” It remains to be seen whether a stronger Nordic economy can offset a weaker Southern Europe.

The slow sales in EMEA and Asia may be offset by a predicted 6–8% year-on-year expansion in drive sales in the Americas. IMS reports that this market has remained resilient in 2012 and it expects revenues to rise.

“The Americas are seeing stronger motor drive sales, in large part, because the US is on a stronger financial footing, while the Eurozone is still in the midst of its financial crisis,” Campos explains. “In addition, an increase in commercial HVAC, oil, gas, and mining projects in the US, Canada and South America, has resulted in an increase in demand for motor drives. Finally, as drive prices have decreased and energy costs have increased, many companies have decided to replace motor starters and soft-starters with drives.”
In China, interest rate cuts and extra spending on infrastructure contributed to a 5.2% increase in LV drive sales during the second quarter of 2012, compared to the first quarter. However, IMS warns that future Chinese economic stimulus may be muted as a result of the previous credit expansion, the tight labour market, and fears over inflation.

“China’s investment-driven economy of recent years has left industries with low capacity utilisation rates,” says Campos. “In addition, a housing bubble, overstretched credit markets, and fragile commercial banking have made China vulnerable."

Reacting cautiously to the slower Chinese economy in 2012, Chinese distributors have decreased their inventories. These will need to be replenished as the Chinese and global economies gain a firmer footing in 2013.

IMS expects the drives market to have a stronger year in 2013 as some of the political uncertainties in the US, the Eurozone and China
are resolved.

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