The global military vehicle market faces an uncertain future as many countries face defence spending cutbacks and procurement delays and contractions, according to a new report by Frost & Sullivan.
The company said that the global military land vehicles market is expected to witness slow growth at a compound annual growth rate (CAGR) of 0.7% during 2012-2021.
“The reason for the short term slowdown is decline in the Western defence markets. Currently the global military land vehicle market is dominated by the United States. However, expected cuts in major U.S. vehicle programmes will result in a decline of 1.5 percent. Growth momentum will pick up again in the medium term as the Asia-Pacific and Middle East markets reach procurement phase. The Western market will offer opportunities in the form of upgrades and capability sustainment,” Frost & Sullivan said.
“Countries in Europe and North America intend to get rid of legacy equipment, but the new vehicle procurement numbers in traditional Western defence markets will decline in the future,” notes Frost & Sullivan Senior Research Analyst, Mahendran Arjunraja. “Suppliers can no longer rely on one country and will be forced to focus on multiple markets in APAC and the Middle East to remain profitable.”
“The changing nature of warfare and ever increasing cost of military operations are forcing military planners to rethink their future vehicle capabilities. Future military operations will be asymmetric and forces have to operate in urban environments. Mobility, modularity, protection and compatibility with other battlefield elements are key attributes for future vehicles to protect against contemporary threats in a cost efficient way. The need for agile vehicles will, in turn, boost demand for light weight and hybrid vehicles,” the report noted.
Looking for new advanced solutions, end users are also increasingly interested in modular platforms that offer more benefits than conventional vehicles. Similarity in components reduces the vehicle life cycle cost and also enables a lean supply chain. “Having a fleet of modular vehicles allows the end user to use a single vehicle for different applications by modifying and configuring specific components,” explained Arjunraja. “This flexibility increases the preference for modular vehicles and we expect significant future growth in the segment.”
“As ‘quality over quantity’ is getting more and more important, offering a cost efficient solution will be a major challenge for the suppliers,” summarised Arjunraja. “While the government authorities place strong emphasis on reducing system acquisition and sustainment costs, Commercial off the Shelf (COTS) is a way to realize cost savings. Over the last few years the use of COTS has gradually increased and should encourage more commercial suppliers to offer military solutions.”
In July ICD Research/Strategic Defence Intelligence predicted that the overall market for armoured vehicles was projected to drop from US$25.1 billion in 2011 to US$24.1 billion by 2021. However, the value of the armoured vehicle maintenance, repair and overhaul (MRO) market (Armoured Personnel Carriers, Main Battle Tanks, Mine Resistant Ambush Protected vehicles and Tactical Trucks) was expected to increase at a CAGR of 5.86% until 2021.
“The expenditure in this [MRO] segment during the forecast period is expected to be dominated by North America, followed by Asia Pacific and Europe. Despite the economic crisis in Europe, Europe’s share of the global market is projected to increase during the forecast period, albeit marginally due to the scheduled deployment of various modernization programmes initiated in previous years,” according to the publication.
While the demand for armoured vehicle MRO has increased, ICD predicts that the global market for armoured and counter IED vehicles will decline during the next nine years, as global operations in Afghanistan and Iraq draw down toward the second half of the decade. “As a result, the global AFV market is expected to register a negative combined annual growth rate of -0.43% during the 2011-2021 period, to reach US$24.1 billion by 2021,” according to ‘The Global Armoured vehicles Market 2011-2021′ report. Nevertheless, the cumulative market value for armoured vehicles and counter IED vehicles acquisition during the forecast period is estimated at US$265 billion.
“Despite the high fiscal deficit of North American countries, this region is expected to account for the largest share of the armoured vehicles market during the forecast period, with a share of 31.9%. Countries in Europe are also facing high fiscal debt, which will reflect in the declining market for armoured vehicles during the forecast period. Europe is expected to account for 26.5% of the total armoured vehicles market during this time,” the report said.
It observed that strong economic growth, territorial disputes, domestic violence and the large troop size of regional forces will create a significant demand for armoured vehicles in Asia, which will account for a share of 24.1% of the total armoured vehicles market during the forecast period (2011-2021). Soaring oil prices and high economic development in the Middle East is expected to be reflected in the demand for armoured vehicles in the region, which will account for 8.8% of the total armoured vehicles market during the forecast period.
“Latin American countries are expected to modernize their armed forces over the forecast period; and their main modernization priority is expected to be on the air force and navy, and for other electronic and cyber warfare capabilities. As a result, the demand for armoured vehicles in the region will witness a slight increase, and South America will account for just 4.7% of the global armoured vehicles market during the forecast period.
“The demand for armoured vehicles in Africa is expected to be strong in the forecast period, driven by the discovery of new mineral and oil resources, and territorial and ethnic disputes. However, the small defence budget of countries in the region will result in a small market share of 4.1%.
“Together, APCs and IFVs are expected to account for the largest share of the total armoured vehicles market across the forecast period. APCs are expected to account for 24.4% of the total market, while IFVs are expected to account for 23.2%. Increasing global troop sizes and overseas operations are expected to increase the demand for tactical trucks for operational efficiency and LMVs for deployability and mobility, with tactical trucks accounting for 18.3% and LMVs accounting for 15.4% of the total armoured vehicles market during the forecast period.
“Countries facing conventional threats such as territorial disputes and hostile neighbors will drive the demand for MBTs, which are expected to account for 12.7% of the total armoured vehicles market. The end of the Iraq war and Afghanistan war, coupled with the integration of mine protection technology in all other classes of vehicles, will result in MRAPs contributing a share of 6% to the armoured vehicles market.
“Overall, the key factors behind the increasing demand for armored vehicles on a global level are overseas peacekeeping missions, the military modernization initiatives of governments around the world, and the territorial disputes and internal insurgencies faced by many countries,” the report said.
The US and Canada are the largest defense spenders in North America, and IFVs, LMVs and tactical trucks are expected to dominate the armored vehicles market in the region. The top markets in Europe for armoured vehicles are expected to be Russia, the UK and France, where APCs, IFVs and LMVs are expected to account for the largest share of the market. India, China and South Korea are the leading markets for armored vehicles in Asia, as these countries face threats such as territorial disputes and domestic violence, resulting in considerable demand for MBTs. South Africa dominates the African armored vehicles market, with a total expected value of over US$1 billion for the forecast period. The country is expected to procure tactical trucks, APCs and MRAPs, according to ICD.