Frost: Need for Energy Efficiency Bolsters Electric Drives Market in HVAC Industry
July 21, 2008 // Published as a news service by IHS
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Europe's construction boom has boosted its heating, ventilation and air conditioning (HVAC) industry, according to Frost & Sullivan, in turn buoying the electric drives market.
HVAC accounts for nearly 10% of the total electric drives market revenue.
Recent analysis from Frost & Sullivan of the electric drives market in the European HVAC industry found earned revenues of $292.5 million in 2007, with estimates to reach $456.5 million in 2014.
The HVAC industry's status as one of the major consumers of electrical energy among industries in Europe and the recent hike in energy costs have compelled electric drive manufacturers to develop energy-efficient systems.
Analysts said the passing of standards and directives stressing energy conservation bolstered this development.
Analysts said the implementation of these directives has not been smooth in certain Eastern European countries due to their unstable political situations and lack of efficient systems.
Their changing economies and therefore, varying construction industry trends have also deterred long-term investments in the market.
Meanwhile, rising competition is squeezing electric drive manufacturers' profit margins, analysts said, especially with the rising demand for smaller and low-cost HVAC drives. Manufacturers have to develop a novel and clever business strategy to maintain their market share in this price-competitive environment.
The falling prices have also had a positive fallout, analysts said. "The declining prices of the drives have ensured that the payback period of the investment on these drives has shortened," said Frost & Sullivan research analyst Venkataraman Salavakkam. "With shorter payback periods, users are able to justify the capital expenditure on these products."
The growing awareness of the financial benefits of energy conservation is increasingly driving the replacement of power-hungry HVAC systems with energy-efficient systems, which incorporate variable frequency drives that increase efficiency levels. To sustain this momentum, analysts said participants could also offer value-added services, as they can often sway purchase decisions in their favor in this highly competitive market.
Analysts said stakeholders can ensure customer loyalty by developing a strong, responsive and agile after-sales service network that will ensure customers' needs are met. This move will also bring in substantial service revenue. In fact, while the alternating current (AC) and servo drives segments are the biggest revenue generators, the direct current (DC) segment mainly relies on maintenance and repair orders to sustain itself.
The sales of electric drives are likely to be buoyed by the products' ease of use. The improvements in technology have eliminated the need for operators to have excellent technical expertise or an understanding of the machines and processes, analysts said.
"The control panel of the drives is user-friendly and embedded with a range of features," said Venkataraman. "This ease of use has converted them to simple devices, and has encouraged OEMs [original equipment manufacturers] and mechanical contractors to use the drives in HVAC systems."
Source: Frost & Sullivan.