Demand will rise with higher fuel economy standards and consumer spending power
Los Angeles, CA (PRWEB) November 09, 2012
The Turbocharger Manufacturing industry faces positive and negative forces that support its future while limiting its growth. On the positive side, favorable regulations regarding fuel efficiency at the federal level have spurred automakers to build smaller engines capable of producing power comparable to larger engines. Turbochargers make this possible, and engine manufacturers have widely adopted their use to boost performance while reducing weight and the overall footprint of the vehicle, thereby decreasing rolling resistance and improving gas mileage. “On the negative side, high steel prices, combined with rising competition from cheaper imports, have mitigated revenue growth and profit margins,” says IBISWorld industry analyst Josh McBee. In light of these opposing forces, IBISWorld expects industry revenue to remain relatively flat during the five years to 2012, increasing at an annualized rate of only 0.3%.
Since 2007, the US economy has reeled from the adverse effects of the subprime mortgage crisis and ensuing high unemployment. Consequently, US consumers have been unable to invest in new cars. At the same time, US automakers failed to join the production trend toward smaller, more fuel-efficient vehicles that foreign manufacturers had already embraced, thereby losing out on a growing market for more environmentally friendly vehicles. Slumping demand from US engine makers set turbocharger manufacturers back an estimated 14.6% in 2009. Since then, President Obama's announcement of new standards regarding corporate average fuel economy (CAFE) standards has injected new life into the industry, spurring demand for US and foreign turbochargers. As such, revenue is expected to increase 3.3% and total an estimated $2.2 billion through 2012. The Turbocharger Manufacturing industry has a high level of concentration, with the three major players – BorgWarner, Cummins and Honeywell International – collectively accounting for the majority of revenue in 2012. “As a result of this high concentration, price competition is high and medium-to-low profit margins are made on most of the industry's products,” adds McBee. “Going forward, the industry will continue to become more fragmented as players enter the industry to meet increased demand from Latin America and South America.”
Turbocharger demand is anticipated to rise in the coming five years as the new CAFE standards continue to pressure automakers to achieve higher fuel economy. Also, returning spending power to the US consumer as unemployment slowly falls and per capita disposable income increases will raise the likelihood and potential for consumers to purchase new vehicles. The downside of the industry's outlook in the next five years includes continued pressure from cheaper imports that keep the industry operating at a trade deficit. Through 2017, industry revenue is projected to increase. For more information, visit IBISWorld’s Turbocharger Manufacturing in the US industry report page.
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IBISWorld industry Report Key Topics
This industry manufactures turbochargers. Turbochargers are centrifugal compressors powered by the exhaust-gas turbine in an internal combustion engine. They are predominantly used in automobiles to enhance performance, but they are also used in aircraft, motorsport vehicles, commercial boats and industrial applications. Superchargers, which derive their forced induction from mechanical power, are excluded.
Key External Drivers
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Products & Markets
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Globalization & Trade
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