North American AC Integral Horsepower Motors Markets

Research Overview

Maintaining Profit Margins When the Price of Commodities are High

The price increase of commodities like Steel, Copper and Aluminum, has heavily affected the profit margins of the motor manufacturers. The price of commodities went drastically up in 2003. This happened because of the global economic recovery and heavy intake of commodities by countries like China. This has led to the increase in production costs. To compensate this, they had to increase their product price which was not a welcome move when it came to handling issues like customer satisfaction. There were price increases in three stages in 2004 by which the motor manufacturers are seeing some decent increase in their profit margins which were really down. This increase is anticipated to be alive till mid 2006.

Availability of Capital Enhances Revenue Prospects

During the recession, the investments were scarce even when the interest rates were very low. The 9/11 events added adverse effects to this scenario, keeping the investment levels still low even when the economy started regaining strength. Now that the U.S. economy has recovered and improved a lot since mid 2003, the investments by the OEMs have gained momentum in the sense that there is good capital available in the market, increasing the demand for motors and hence the revenue in the North American AC IHP motors market.

Customer Satisfaction Leads the Share Winning Factors

Motor manufacturers are striving hard to keep their pricing low. With the commodity price reaching real highs reduction of production costs becomes the toughest task. Lead time reduction demands investment on automation and lean manufacturing which again would have a poor pay back with a weak product costing. With all these challenges forming a formidable barrier in the business prospects of motor manufacturers, those who survive with a sustained market share if not an increase are those who strike a balance between their product costing and profit margins to attain the maximum customer satisfaction.