Modernisation in Russia, Ukraine - electric motors

While old and outdated equipment is undermining the competitiveness of the Russian and Ukrainian manufacturing sectors, at the same time it is creating opportunity for replacement sales.

While old and outdated equipment is undermining the competitiveness of the Russian and Ukrainian manufacturing sectors, at the same time it is creating considerable opportunity for replacement sales.

However, with only a few companies capable of investing in new equipment, Russian and Ukrainian electric motors suppliers may be forced to consider extending their product portfolios, as a route to supporting market share while better responding to customer needs.

Frost and Sullivan estimates that revenues in the Russian electric motors market will rise to US$1,456.2 million in 2012, while the Ukrainian electric motors market will expand to US$287.8 million over the same period.

"A substantial number of Russian and Ukrainian manufacturing companies are currently working with equipment that, in Western Europe or North America, would be considered obsolete," observed Frost and Sullivan research manager Richard Tamworth.

"As a result, most suppliers of electric motors to the Russian and Ukrainian markets expect the replacement cycle to intensify in the next few years, as many companies face the problem of not being able to operate if they do not buy new manufacturing systems or at the very least, new motors to drive their old ones." However, despite both the optimism of suppliers and a broader industry recognition that relatively obsolete equipment is hampering their competitiveness in the global markets, only a few Russian and Ukrainian manufacturers, for example those connected to the oil trade, actually possess the resources to invest in the modernisation of their production facilities.

Many companies lack the capital to update their facilities as their sales are low, their production capacities are often severely underutilised and their margins poor.

"Although production companies realise they are using outdated equipment, many of them do not have the budget required to renew their production facilities.

This lack of investment may prove to be one of the biggest setbacks for the Russian and Ukrainian motors markets, and perhaps their economies in general," noted Tamworth.

"Despite the gradual, if inconsistent improvement in the economic situation in these countries, many manufacturers are still obliged to repair existing equipment and motors and plan to buy new ones only when necessary." The inability or unwillingness of manufacturers to invest in new equipment has a number of more strategic ramifications.

The overall quality or technology requirements of the Russian and Ukrainian markets are, typically, relatively low.

Inevitably, companies with limited financial resources tend to focus on the basic configuration of electric motors.

"As a generic marketing strategy, Russian and Ukrainian electric motor suppliers should therefore consider offering comprehensive product portfolios where a customer has several component options, mixing ultra-low cost basics, with more advanced, perhaps imported options," advised Tamworth.

"This will allow them to better accommodate widely varying customer needs and secure significant competitive advantage." * About Frost and Sullivan - Frost and Sullivan, a global growth consulting company, has been partnering with clients to support the development of innovative strategies for more than 40 years.

The company's industry expertise integrates growth consulting, growth partnership services, and corporate management training to identify and develop opportunities.

Frost and Sullivan serves an extensive clientele that includes Global 1000 companies, emerging companies, and the investment community by providing comprehensive industry coverage that reflects a unique global perspective and combines ongoing analysis of markets, technologies, econometrics, and demographics.

* Emerging Opportunities in the Russian and Ukrainian Electric Motors Markets: B594 - 17.

Back to top