Volatile demand will level out as freight operators buy EPA-compliant engines
Los Angeles, CA (PRWEB) March 29, 2012
The Heavy-Duty Diesel Engine Manufacturing industry grew over the past five years. Industry revenue is expected to expand at an average annual rate of 1.4% to $10.6 billion in the five years to 2012. The industry's growth, however, masks a period of volatility. The first of two phases of Environmental Protection Agency (EPA) emission and fuel efficiency regulations took place in 2007, causing a flurry of purchases before the regulatory deadline as it was largely expected that engines would cost more after 2007, resulting in a drop in industry revenue during that year as fewer engines were purchased. This was followed by the recession, which caused a downturn in demand for the industry's products. However, the industry has turned the corner. International trade jumped in 2011 as emerging economies grew quickly and in turn, freight operators experienced heightened freight volumes. “These firms purchased heavy-duty trucks and engines at higher rates as demand for their services rose,” said IBISWorld industry analyst Justin Molavi. Furthermore, domestic industrial production rose in response to demand from emerging economies for construction and industrial related goods. As such, engine sales increasingly were sourced from industrial producers seeking to incorporate new machinery or upgrade existing machinery. These trends will continue to benefit the industry during 2012 and industry revenue is expected to increase 2.6% from 2011 to 2012.
The next five years are set to be brighter for the industry. The global economy is anticipated to gain pace, resulting in heightened levels of international trade and demand for industrial goods. In turn, freight operators will order more engines and industrial firms will accelerate their purchases to meet demand for their goods. Additionally, despite the existence of further fuel efficiency and emissions regulations by the EPA, industry manufacturers will be better equipped to meet these regulations amid high demand for fuel efficient engines. Industry firms that concentrate on producing fuel-efficient engines will be competitive over the next five years. As a result of these trends, industry revenue is anticipated to grow in the five years to 2017.
The Heavy-Duty Diesel Engine Manufacturing industries carries a moderate level of market share concentration, with the top four companies in the industry accounting for more than half of industry revenue in 2012. Steady consolidation has driven the growth in market share concentration over the past five years, as the number of industry enterprises is expected to fall. According to Molavi, much of this consolidation can be attributed to the recession's effect on the smaller industry players, forcing them to exit the industry; however, there has also been significant mergers and acquisitions made among the larger firms over the past five years. For example, in October 2010, Caterpillar Inc. acquired German engine supplier MWM Holding GmbH. This move greatly diversified Caterpillar's portfolio of engine technology and also solidified their desire to compete on a global scale. Over the next five years, IBISWorld expects concentration to grow further as the biggest firms in the industry continue to leverage their favorable economies of scale in order to acquire niche engine developers. For more information, visit IBISWorld’s Heavy-Duty Diesel Engine Manufacturing in the US report in the US industry page.
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IBISWorld industry Report Key Topics
This industry manufactures heavy-duty diesel engines. A diesel engine is an internal combustion engine that uses the heat of compression to initiate ignition to burn the fuel, which is injected into the combustion chamber. Top manufacturers include Cummins, Caterpillar and Navistar. These engines are used in highway vehicles (i.e. freight trucks) and machinery.
Key External Drivers
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Products & Services
Globalization & Trade
Market Share Concentration
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