End Uses and End Users of Small Electric Motors

Business Economics, April, 2000 by Michael Deneen, Andrew Gross

The 1990s also saw expansion of other major markets for small motors, with computers and office equipment leading the way, followed by appliances, other durables, and heating and cooling applications. The industrial machinery sector did well, responding to capital investment, but aerospace markets held stable due to slow government defense spending. On the whole, however, Table 1 shows that each sector is expected to show a decline of one to two percentage points during 1998-2003 compared to 1998-1989 in its use of small motors.

The demand for fractional horsepower motors is influenced not just by macroeconomic variables, but also by technological innovations, changes in the regulatory environment, and international activity. Innovations in industrial systems can affect both the level and the type of motors in demand. Government regulations and association rules can mandate higher product standards regarding safety and environment. Competition from foreign manufacturers impacts both pricing and other corporate strategies. Valeo SA of France, one of the top seven firms, just announced major job cuts and a shift in operations from North America and Western Europe to South America and Eastern Europe.

U.S. international trade in fractional horsepower motors has been strong and will continue to show faster growth than is the case for domestic shipments. Details are shown in Table 2. Imports will grow at about 5.8 percent annually, reaching $3.1 billion by 2003. The growth is fueled mostly by the labor cost advantages for manufacture of original equipment enjoyed by Mexico and Asia, which accounted for thirty-eight and thirty-nine percent of the total, respectively in 1998.

At the same time, U.S. and foreign producers are eyeing markets in Asia, Latin America, and Africa, which are expected to show faster growth rates than those in North America, Western Europe, and Japan. Thus, growth of exports, projected at 7.2 percent annually, should reach $950 million by 2003. Canada and Mexico constitute the two dominant export markets, together accounting for sixty percent of total exports. "Subfractional" brushless DC motors and 1/10 to 1 horsepower AC motors are the best export candidates; automotive applications will dominate.

Competitive Marketing Practices

Makers of small electric motors attempt to compete on the basis of both product design and technical performance and are eager to get away from commodity-like pricing. However, technological advances are evolutionary and the pressure on suppliers to keep prices down is very strong from the OEMs, especially car makers who account for over one-third of total demand.

In particular, product design can be of competitive advantage for those who can meet the QEMs' requirements for even further miniaturization, modularity, varying voltage levels, and variable --or at least smooth--speed (range can be 900 to 3,200 rpm). The print version of many manufacturers' catalogs is usually a thick book, listing thousands of configurations for hundreds of uses. Branding can be a distinct edge. Warranties are offered usually for twelve months from date of installation or twenty-four months from date of manufacture. Many of the large players emphasize both pre- and post-sale services.