Although the European gearbox and gear-motors market has consistently recorded moderate growth - except in 2009 during the global recession - European manufacturers are challenged by intense competition and low margins, finds a new study from Frost & Sullivan.
According to the report, the European gearbox and gear-motors market earned revenues of 2.9281 billion euros in 2010 and expects to earn 3.72115 billion euros by 2017.
However, buyers are becoming more sensitive, and manufacturers can no longer rely solely on low production costs to gain a competitive edge, the report states.
The need to cut costs and improve productivity is driving European manufacturers to invest in more-efficient power transmission technologies. They are also focusing on product differentiation and technological innovation to ensure the sustained use of geared components in the future.
In particular, heightened environmental concerns and escalating energy costs will promote the use of wind farms - a consistent end-user segment - resulting in greater demand for gear solutions.
At the same time, simplicity of design will facilitate the widespread acceptance of gear technology across other applications and end-user segments, the report notes, adding that this technology is perceived to be the most cost-effective for industrial mechanical power transmission.
The prevalence of gearbox and gear motors is, however, being threatened by alternative and advanced technologies like variable frequency drives. Widespread availability, falling prices and increasing awareness of the advantages of electric drives are motivating end users of gear products to adopt these newer technologies, according to the report.
"This has been exacerbated by the fact that most potential applications have already been identified and satisfactorily addressed by gearbox and geared motor manufacturers," says Frost & Sullivan research analyst Ramasubramanian Natarajan. "Consequently, they have found it difficult to penetrate newer applications and increase their market share."
To sustain growth, market participants should focus on nurturing the customer-manufacturer relationship, the report recommends. In addition, as end users shift their manufacturing base to eastern Europe, motor manufacturers need to augment their penetration of these regional markets.
Strategic merging and sharing of technology between companies can also lead to product development for mutual benefit. To offset foreign competition, manufacturers should invest in research and development to produce cost-effective and high-quality products, the report also recommends.
"In order to compete effectively against low-cost imports, European manufacturers can outsource the production of non-critical components to regions which offer low-cost labor and raw materials," advises Ramasubramanian. "The final component can then be inspected and assembled by more skilled labor in Europe."