25 Jul 2024


Prices of compact AC drives drop by 4% in Europe

“Suppliers accepted lower overall margins on compact drives to maintain and secure customers to which they sell higher-margin products,” reports IMS analyst, Rolando Campos.

The declining prices made it easier for buyers to obtain budget approvals in a tight-lending environment, with the result that shipments of small drives – those rated below 25kW – grew by 2.6% over 2011 levels. Nearly 11 million of them were shipped during 2012, despite the economic slowdowns in Asia and Europe.

IMS predicts that the global market for these small drives will reach the $3bn mark by 2016. More than half of this business will be in China where the market has expanded rapidly in recent years, reaching $880m by 2012. Sales are expected to nearly double again by 2016.

IMS says that end-users are increasingly demanding low-priced, simple products, and the industry is responding by splitting its compact AC drive portfolios into simple, low-priced lines and more complex, higher-functioning and expensive drives.

Due to intense competition and the penetration of new cheaper compact drives, profit margins in the compact drives market declined during 2012. Some companies in Europe and Japan, which were reluctant to drop their prices in line with the rest of the industry, ended up losing market share.

In response to the more competitive market, some suppliers are moving towards drives products and markets where there is less competition, more opportunity to add value, and higher potential margins.

Globally, compact AC drive prices are estimated to have declined by nearly 2% during 2012. As the world economy recovers, these declines are expected to moderate, resulting in higher profit margins for suppliers. IMS predicts that future reductions in the prices of compact AC drives will moderate to about –1% CAGR between 2012 and 2016.
Chinese drives manufacturers who have been doing well in their home market in recent years are now expanding abroad, and some suppliers – notably INVT and Delta – have captured market share in Europe over the past year, according to IMS.