Industrial market growth a boost to low-voltage motors and drives
The worldwide market for low-voltage motors and drives in 2018 is an estimated $23.8 billion, which represents a total growth of 4.1% from 2017 revenues. This growth was driven largely by a continued resurgence in the heavy industries such as metal processing, mining and oil & gas.
In fact, the process industries in general have largely benefitted since oil prices began rebounding in 2016. Leading the way in growth for low-voltage motors and drives has been the oil & gas industry; since 2016, motor and drive revenues into this sector have grown by about 14% due to rising oil prices and the ensuing capitalization of projects that previously had been delayed.
IHS Markit also has reported an increasing adoption of drives, also referred to as variable frequency drives (VFDs), within key growth applications such as pumps, fans and compressors, which account for more than 75% of motor-driven system applications. Those three motor-driven systems are a main focus because end users have increased their awareness of energy-efficient solutions.
Because of this, IHS Markit has reported a significant increase in VFD adoption rates. The crucial trend in the larger industrial automation field, however, is smart manufacturing. Motors, drives and motor-driven equipment generally are not seen as “smart” equipment, but that is rapidly changing. Product managers are working more and more closely with Industrial Internet of Things (IIoT) experts in order to bring software to the customer that will enable the proper sizing of equipment in order to optimize and ensure energy efficiency, safety and lean manufacturing, to name a few examples.
For low-voltage motors specifically, price increases have been a major trend affecting the competitive environment. Many of the raw materials are bought in China, which of course puts a very heavy burden on the suppliers who rely on steel from China and other countries affected by the tariffs imposed by the United States.
Due to increasing input and labor costs, many suppliers actually had announced price increases ranging from 3% to 7% before the tariffs took effect, so not all motor suppliers have passed on the cost of tariffs onto the customer; however, prices increased substantially in some developed regions, namely the United States. As a result, IHS Markit expects Vietnam and other South East Asian countries with favorable tax laws and incentives to continue to become a crucial focus for manufacturing, because aside from the tariff issue, China’s labor costs have increased considerably.
In terms of the global market size, the low-voltage motor market was estimated to be valued at less than $12.3 billion in 2018, representing a growth of 4.6% from 2017 and 8.2% since 2016. Much of this growth was generated from price increases.
While energy efficiency has historically been the leading focus for motor suppliers and end users, awareness of the IIoT have given far more things to consider from a business model standpoint. During the economic slowdown from 2014-16, many suppliers were paying less attention to growing market share and more attention on profitability through leaner manufacturing processes and increased service offerings.
Efficiency still a factor
When commodity prices were really low and the economy was drastically slowing down, the rate of adoption for higher efficient motors also slowed down. That is likely not driven alone by organic economic factors; in fact, IHS Markit research has shown that inorganic pressures from the government are the biggest indicator of motor efficiency sales.
In 2016, the global share of low-voltage electric motors with an energy efficiency designation of IE3 (NEMA Premium Efficiency) was 18.2%. In 2022, IHS Markit forecasts that this allocation will increase to almost 26%.
Total low-voltage drive revenues in 2018 are estimated to have been worth about $11.5 billion, representing a growth of 3.4% from 2017 revenues. This growth rate indicates a levelling out of the market after a strong year in 2017, which saw a 7% growth in revenues from 2016. This resurgence in the low-voltage drives market is due largely to a recovery in the heavy industries, much like the case with the motor market.
Price pressure still exists in the low-voltage drives market, with the average selling prices (ASP) falling by over 1% from 2016 to 2017. The ASP in the global low-voltage drive market was below $550 per unit in 2017 and below $545 in 2018. Although low-voltage motor drive revenues do not directly benefit from the positive effects of the minimum motor efficiency legislation as with low-voltage motor revenues, the overall drives market benefits from the greater focus on system efficiency.
It is currently the case in the European Union that motors not attaining an efficiency rating of IE3 must be used with a VFD, but little oversight has been given to this regulation, leading to confusion for suppliers trying to understand the difference with perceived and actual demand. Still, IHS Markit research indicates strong demand for drives in the energy-intensive process industries, so declining prices likely will not offset the currently strong forecast for drive shipments, especially in Europe, where a full systems efficiency focus is commonplace.
The determining factors for whether a customer selects a more efficient motor or a less expensive motor with a VSD largely depends on the customer and the application at this point. In variable speed applications, motor drives have the potential to save massive amounts of energy. In the future, as energy costs increase, the economic benefit from installing such a motor drive also will continue increasing exponentially. The greatest return on investment with regards to drives is mostly seen in pump, fan and compressor applications, which are forecast to outperform the market average for drive applications over the next five years.
Drives have come a long way: they can now be controlled by mobile devices; can identify problems; and can work more efficiently at various speeds and loads. In addition, they are much easier to purchase and install. IHS Markit has been tracking the penetration of connectivity, specifically related to drives. An IHS Markit survey found that 69% of VSDs sold in 2016 were network-enabled, as opposed to 68% in 2015. IHS Markit predicts that this figure will expand to 76% in 2021.