Industry operators have responded to rising import penetration by consolidating
Los Angeles, CA (PRWEB) June 22, 2013
In the five years to 2013, the Electrical Equipment Manufacturing industry's revenue is expected to increase at an average annual rate of 0.2% to $4.9 billion. According to IBISWorld Industry analyst Eben Jose, “the global economic downturn combined with Canada's own recession diminished demand for industry products”. Industry operators rely on demand from downstream industries in the construction and manufacturing sectors, but when consumer demand dried up, these industries cut back on their purchase orders. Growing import penetration has further added to the industry's difficulties. Countries, such as Mexico and China, are able to produce similar products at a much lower cost, which in turn lowers the price for end users. In 2013, imports will satisfy a larger portion of domestic demand, effectively offsetting any growth from Canada's economic recovery and keeping revenue growth down at a subdued 1.3% for the year.
Electrical equipment manufacturers have responded to the rising threat of import penetration by consolidating, which has allowed them to cut variable costs such as labour and close underperforming manufacturing facilities. “Additionally, many manufacturers have taken advantage of technological advancements to increase automation of production processes”, says Jose. Over the five years to 2013, the number of industry firms is expected to decline. However, the average wage has risen due to the need for more skilled employees to operate the new machinery. A recovery in the construction and manufacturing sectors will help prop industry revenue up in the five years to 2018, however, it will not be enough to offset import penetration. Furthermore, the appreciation of the Canadian dollar will make exports more expensive for the industry's largest trade partner, the United States, while also making industry products pricier for Canadians. As a result, the industry will continue to undergo consolidation and revenue will increase minimally.
The Electrical Equipment Manufacturing industry has a low level of market share concentration. In the five years to 2013, the industry has undergone some consolidation as many of the industry's smaller manufacturers have been unable to keep their doors open when the country fell into a recession. Over the period, IBISWorld estimates the number of enterprises has decreased. IBISWorld expects some the decline is due to offshoring and merger and acquisition activity. Larger firms such General Electric and Eaton Corporation often purchase smaller manufacturers that might have a valuable patent on a product or manufacturing process. Additionally, many manufacturers have been closing down operations and moving their facilities to countries like China and Mexico because such countries have much lower labour costs.
For more information, visit IBISWorld’s Electrical Equipment Manufacturing in Canada industry report page.
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IBISWorld industry Report Key Topics
This industry manufactures power, distribution and specialty transformers; electric motors, generators and motor-generator sets; switchgear and switchboard apparatus; relays; and industrial controls. Electrical equipment manufacturers distribute their products to other manufacturing industries and to wholesalers and the construction industry.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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