China: The world’s largest and fastest growing AC induction motor market
The Chinese market for low voltage AC induction motors is by far the largest and fastest growing industrial motor market in the world. Valued at an estimated $2.7 billion in 2010, it was equal to the US and German markets combined. Furthermore, market revenues are projected to nearly triple by 2016 by growing at an average rate of more than 17% per year.
There are several critical factors fueling this rapid growth: government-mandated transition to more efficient and therefore more expensive motors, robust demand for industrial machinery for both domestic consumption and export to other countries, and large amounts of capital investment occurring in end-user sectors. Although machinery and capital spending growth will certainly facilitate continued expansion of the Chinese motors market, we believe that the minimum energy performance standards (MEPS) currently being implemented by the Chinese government, as well as new motor efficiency legislation being ratified in the country over the next twelve months, will have the biggest impact on its future growth.
There are currently three series of motors in widespread use in China: the Y/Y2 series, which is below IE1 efficiency levels and designed in the 1980s; the YX/YX2 series, which is equivalent to IE1 but short of IE2 efficiency levels and developed in the 1990s; and the recently introduced Y3 series motors, which are better optimized to reduce material consumption, but whose efficiencies still do not meet IE2 levels. As such, the contrast in the product composition of the Chinese and global markets from a motor efficiency perspective was quite glaring in 2010.
The Chinese readily admit that they are latecomers in the area of mandating motor efficiency. However, they are compensating for this in many ways, such as transitioning from one motor efficiency level to the next much more quickly than similar schemes in the US, Europe and other developed markets. The Chinese government has also been heavily subsidizing and incentivizing these transitions, and positioning China as a leading voice in the establishment of the next motor efficiency frontier, namely the currently undefined IE4 efficiency class. In order to meet IE4 levels of motor efficiency the Chinese will likely rely on permanent magnet motors that utilize rare earth minerals, such as neodymium; China currently produces about 97% of the global supply of these materials. China’s strategic domination of the rare earths market deserves its own analysis, but it is worth mentioning here due to the potential implications it may have on the future of the global motors market.
GB 18613 is the mandatory standard for electric motors in China used to promote energy efficiency improvements of the motor itself and the entire motor system. The development of this standard has occurred in three phases:
- The first version of this standard was issued by the Chinese government in 2002. Only minimum energy performance standards (MEPS) and target values were specified.
- In 2005, the China Energy Label scheme was initiated. The GB 18613 standard was also revised during the year and the second version was issued at the end of 2006, taking effect on July 1st, 2007. The most important change was the establishment of efficiency grades for motors, making it possible to apply efficiency labels to these products. The EFF1 and EFF2 efficiency classification of the EU-CEMEP motor efficiency voluntary agreement was directly adopted as grade 2 and grade 3 respectively. The most efficient value, grade 1, was developed based on the Australian motor standard AS/NZ 1359.5.
- The latest revision of the standard was completed in late 2010 and is currently waiting for approval. Compared to the previous version of the standard several major changes have been made. Most importantly, the efficiency classification system has been adjusted: grade 2 from the current rating system will become grade 3 in the new rating system; thus the current grade 3 will become void. The new grade 3 will directly correspond to the IE2 classification and grade 2 to IE3. The highest efficiency grade 1 will be based on IE3 with a 15% loss reduction (IE4) and will also refer to related information specified in IEC 60034-31. The standard has been delivered to the Standardization Administration of China for approval and is expected to be issued by the Chinese government in 2012.
All of these efforts on behalf of the Chinese government are starting to bear fruit. Chinese motors are increasingly being exported all over the world, including to markets such as North America and Western Europe, where they are traditionally considered inferior. In addition to improved quality, some Chinese motors are matching their better known competitors in efficiency levels, often at much lower price points. This increased perception of quality and reliability, coupled with the current economic environment in which costs are heavily scrutinized, has allowed Chinese motors to take away market share from well entrenched players. After all, it is difficult for any customer to miss the value in being able to purchase two Chinese IE4 efficiency permanent magnet motors for the price of a single IE2 or IE3 motor made by Western suppliers.
Undoubtedly, legislative requirements for higher efficiency motors are fueling growth of the low voltage AC induction market on a global scale, with market revenues projected to double by 2014 compared to 2009 levels. However, China’s contribution to growth should not be understated, both in terms of its ability to create demand and its increasingly visible role in leading-edge technology adoption.