Electric Drives Market

Market Overview

The global electric drives market size was valued at USD 23.98 billion in 2022. It is estimated to reach USD 35.39 billion by 2031, growing at a CAGR of 4.42% during the forecast period (2023–2031).

Electrical drive refers to the system used to govern the motion of an electrical machine. In other terms, the drive that employs an electric motor is known as an electrical drive. The electrical drive utilizes the following prime movers: diesel or gasoline engines, gas or steam turbines, steam engines, hydraulic motors, and electric motors. This prime mover provides the mechanical energy for motion control to the drive.

The primary components of electrical drives include the power modulator, the motor, the controlling unit, and the sensing units. The power modulator controls the source's output power. The control unit controls the power modulator, which functions at low voltage and power levels. The sensing unit measures a certain drive parameter, such as the motor's current and speed. It was primarily necessary for closed-loop functioning or protection.

Highlights

• AC drives dominate the product type segment
• Low-voltage electric drive dominates the voltage segment
• Metal and mining dominate the end-user segment
• Asia-Pacific is the highest shareholder in the global market

Market Dynamics

Global Electric Drives Market Drivers

Increasing Adoption of Automation 

The global market for electric drives is expanding steadily as there is an increased demand for flexible and optimized products to meet this demand. This growth is seen in highly developed markets and emerging nations as enterprises try to escape outdated technology and incorporate automation in their factories and plants. In addition, businesses utilize the "digital factory paradigm," providing a clear competitive advantage as traditional IT concepts and industrial technologies converge. The production model is moving toward digitalization in all sectors and internationally, and many enterprises are increasingly adapting to it. Industrial automation has raised the demand for products, which is expected to drive the demand for electric drives.

Significant Demand for AC Drives or VFD 

Variable Frequency Drives (VFDs) have been used with motors to increase efficiency and make them cost-effective over the past few years. Several IE2 and IE3 motors are used along with VFDs, enabling them to meet the higher efficiency specifications of IE4 motors. Moreover, many European countries, such as Switzerland and others, have passed regulations on using VFDs with motors. The installation of IE2 motors is only allowed if they are used with VFDs.

Several end-user industries across the globe are also using VFDs with IE3 motors, which deliver the same results as IE4 motors to beat the high costs associated with IE4 motors. Since motors consume the most energy and generate significant energy costs, many vendors increasingly use VFDs with their motors. Since most end-user industries use AC motors in their operations, the demand for AC electric drives or VFDs will supplement the electric drives market in the forecast period.

Global Electric Drives Market Restraint

Unstable Demand from the Oil and Gas Industry

Oil and gas have been volatile, impacting the global electric drives market. Sales of high-pressure hydraulic pumps, deep-sea pumps, and synthetic lift pumps of various shapes have all suffered over the past two years. Compared to the reduced demand for coal, metals, and minerals and decreasing demand for motors, the mining sector has also witnessed losses similar to offshore oil and gas.

Global energy transitions are impacting the oil sector, and firms need to weigh the expenditures required to ensure enough supply against the need to reduce emissions. In a decarbonizing environment, refiners face a significant challenge from a lower market for transport fuel. Hence, developments are expected to face a setback, and the demand for electric drives in major countries is expected to be impacted.

Global Electric Drives Market Opportunities

Future Potential for Integrated Motor Drive (IMD) 

Integrated motor drive (IMD) combines an electric motor with power electronics in the same physical structure. The IMD is formed by eliminating several expensive components, such as shielded connection cables, a separate housing for the inverter, a centralized controller cabinet, and a high-voltage current bus used in the electric drive system. As a result, the power density improves by 10%–20%, and installation and manufacturing costs get reduced to 30%–40% of the overall system.

Additionally, the usage of IMD facilitates attractive cost savings. System efficiency improvements are inevitable with the adoption of IMDs, reducing life cycle energy costs and generating financial savings beyond the IMD's price premium. Moreover, the opportunity to supply adjustable-speed motor drives packaged in a single assembly rather than two housings with interconnecting wire harnesses is appealing to original equipment manufacturers (OEMs) of products such as automobiles and household appliances, which can simplify their manufacturing process by installing IMDs. Such attractive benefits will create opportunities for the electric drives market.

Regional Analysis

Based on region, the global electric drives market is bifurcated into North America, Europe, Asia-Pacific, Latin America, and the Middle East and Africa.

Asia-Pacific Dominates the Global Market

Asia-Pacific is the most significant global electric drives market shareholder and is anticipated to exhibit a CAGR of 5.27% during the forecast period. Asia-Pacific holds a dominant position in the global market due to the presence of leading manufacturing companies, a rapidly growing industrial sector, and significant developments in emerging countries. Manufacturing, construction, power generation, and mining are becoming more important due to the ongoing adoption of industrial automation in several Asia-Pacific nations. In addition, urbanization and industrialization in emerging nations like India, China, and Southeast Asian countries are driving vehicle demand. This is boosting the demand for electric drives from the automotive industry. Moreover, several vendors' investments and expansions in emerging nations in Asia-Pacific are key strategies. Hence, the sales of electric drives in the region will increase in the forecast period.

Europe is estimated to exhibit a CAGR of 3.87% over the forecast period. The primary factor responsible for the second-highest demand for electric drives can be attributed to strict government regulations and energy savings. Europe is the most prominent importer of industrial motors, and over one-third of motors sold in Europe are imported. This means that despite a lower production of motors in the region, huge industry demand still exists. Electric drives are sold largely in combination with motors. Coupled with the stringent regulations, the region's demand for electric drives is high. However, although Europe holds the second-largest share in the global market, it is expected to witness a slow growth rate in the forecast period. This is due to maturing European industries and shifting investments in emerging nations because of low labor costs and improved raw material availability. With high competition from the Asia-Pacific region, Europe is losing its share of Asia-Pacific in the manufacturing industry.

In the manufacturing sector of North America, electric drives are used across several applications, including pumps, conveyors, compressors, fans, mixers, grinders, and other material handling equipment. The production of unconventional fuels such as shale and tight oil completely changed North America's oil and gas industry dynamics. Due to the Shale Revolution that started in 2011, North America has the potential to become the top energy exporter in the coming years. This reflects the huge growth potential for electric drives in the region. The US holds over one-third of North America's electric drives market and significantly contributes to the global market.

In Latin America, foreign investments and unexplored oil and gas reserves are expected to boost the demand for electric drives in the long run. Moreover, the abundant availability of resources coupled with government initiatives in major countries is aiding productivity in the market. However, the impact of COVID-19 has been severe on the country, affecting growth rates for the forecast period. GDP estimates in Latin America were also low for 2020 and 2021. Hence, the demand has been truncated in Latin America for the next two years.

The Middle East and Africa made the lowest contribution to the global market during the forecast period, with slow growth in some industrial sectors. The region is a hub for some of the world's biggest oil and gas-producing countries. In addition, the oil and gas industry in the Middle East and Africa is expected to generate the highest demand for electric drives in the present and forecast period. The major countries contributing to the demand for electric drives in the region include Saudi Arabia, Turkey, Iran, Iraq, the UAE, and Nigeria.

Segmental Analysis

The global electric drives market is segmented by product type, sales channel, voltage, and end-user

Based on product type, the global market is bifurcated into AC and DC drives. 

The AC drives segment dominates the global market and is projected to exhibit a CAGR of 4.68% over the forecast period. An AC drive is an electric device that alternates frequency, voltage, and magnetic flux to regulate the RPM of an electric motor. These drives convert the AC supply to DC using a convertor and then change it back to AC using an inverter to control the speed of electric motors. AC drives are also known as variable frequency drives (VFDs), variable speed drives (VSDs), and adjustable speed drives (ASDs).

Additionally, AC drives provide effective control over the motor's speed and facilitate reduced energy consumption. As a result, AC drives are used in several end-user industries. Industrial sectors predominantly use AC motors, requiring AC drives to control their speed and reduce energy consumption. Therefore, the demand for AC drives will increase with the increasing demand for AC motors.

Based on sales channels, the global market is divided into indirect and direct sales channels. 

The direct sales channel segment is the largest revenue contributor to the market and is expected to exhibit a CAGR of 4.75% over the forecast period. Direct sales channels allow customers to buy goods directly from producers. In the case of electric drives, several vendors sell their products directly through their websites. Many customers tend to buy directly from vendors to reduce the extra cost incurred via intermediaries such as dealers or distributors; this is responsible for the increased share of direct sales in the electric drives market. Direct channels are more costly to set up at the onset and may often need substantial capital investment. As a result, new entrants in the electric drives market would rely on indirect sales channels, which is expected to harm the direct sales of electric drives.

Based on voltage, the global market is divided into medium and low-voltage electric drives. 

The low-voltage electric drive segment is the most significant contributor to the market and is estimated to exhibit a CAGR of 4.75% over the forecast period. Low-voltage electric drives are designed to operate at an output voltage equal to or less than 690 V. In low-voltage electric drives, the circuit turns the AC source into DC voltage with a rectifier, which is then stored in a capacitor. This DC voltage is again converted into AC voltage. In addition, the primary raw materials used in producing low-voltage electric drives include rectifiers, capacitors, and several other components; the caliber of these raw materials directly affects the drive's effectiveness. The high or low efficiency of low-voltage electric drives influences end-users demand. Therefore, the raw materials used in manufacturing low-voltage electric drives play a critical role in the market in terms of procurement costs and demand.

Based on end-user, the global market is segmented into F&B, metal and mining, chemicals, oil and gas, power generation, packaging, cement, textile, water and wastewater, paper and pulp, rubber and plastic, forestry and woodwork, and others. 

The metal and mining segment owns the highest market share and is estimated to exhibit a CAGR of 4.94% during the forecast period. The global metals and mining industry is highly fragmented and dominated by a few large players in the competitive market. Electric drives start large motors and continuously adjust the speed from the mine to the finished product as necessary. Traditionally, the metals and mining industry was dominated by DC motors, which are now replaced by AC motors to attain high efficiency and lower power consumption. Due to the rising use of AC motors, their demand is growing extensively. Larger operators in the mining and metals industries channel significant investments in electric drives for increased reliability, lower energy costs, and increased automation and mechanization.

Recent Developments

• May 2023- Vitesco Technologies introduced an electric drive devoid of rare earths. The fourth generation of its fully integrated electric axle drive platform (EMR4, Electronics Motor Reducer) is being expanded with a new option allowing an even more accurate life cycle assessment.
• April 2023- The Commercial Vehicle Solutions (CVS) division of ZF announced that series production of the new CeTrax lite electric central drive has begun. The new driveline is adapted for light commercial vehicles using synergies from ZF's development and production of passenger car drives.