October 2012Navigating the Changing Landscape of the Military Land Vehicles Market               Mahendran Arjunraja, Seni...
Global Military Land Vehicles Market | Navigating the Changing Landscape of the Military Land Vehicles Market             ...
Global Military Land Vehicles Market | Navigating the Changing Landscape of the Military Land Vehicles Market             ...
Global Military Land Vehicles Market | Navigating the Changing Landscape of the Military Land Vehicles Market             ...
Global Military Land Vehicles Market | Navigating the Changing Landscape of the Military Land Vehicles Market             ...
Global Military Land Vehicles Market | Navigating the Changing Landscape of the Military Land Vehicles Market             ...
Global Military Land Vehicles Market | Navigating the Changing Landscape of the Military Land Vehicles Market             ...
Upcoming SlideShare
Loading in …5
×

Frost & Sullivan Market Insight: Military Land Vehicles Market

5,217 views

Published on

The global military land vehicles market is undergoing a transition. With traditional Western defence markets experiencing budget reductions, industry players are facing an even higher level of uncertainty. For land vehicle suppliers, identifying ongoing trends and adapting to the change is crucial for future success.

Published in: Business
0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
5,217
On SlideShare
0
From Embeds
0
Number of Embeds
2,675
Actions
Shares
0
Downloads
0
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

Frost & Sullivan Market Insight: Military Land Vehicles Market

  1. 1. October 2012Navigating the Changing Landscape of the Military Land Vehicles Market Mahendran Arjunraja, Senior Research Analyst—Aerospace, Defence & Security “We Accelerate Growth”
  2. 2. Global Military Land Vehicles Market | Navigating the Changing Landscape of the Military Land Vehicles Market Market Insight Introduction The global military land vehicles market is undergoing a transition. The impact of the economic downturn on defence expenditure in traditional markets is no surprise. Many countries have been forced to curtail their defence spending and, as a result, vehicle programs in the West are being delayed or facing reduction in procurement numbers. Countries are now focusing on having a lean and agile force that enables rapid deployment. This significant change in military doctrine is influencing the land vehicles market. The experience gained from recent operations in Afghanistan and Iraq has led military end users to rethink future vehicle requirements. However, most countries need to replace their aging fleet of Cold War-era vehicles or upgrade them so they are suitable for modern-day operations. In light of these factors, we expect a significant transition in the military land vehicles market over the next decade. Although notable land vehicle modernization programs are under development and even deployment (as seen in the figure below), Frost & Sullivan is cautious about the future outlook. With traditional Western defence markets experiencing budget reductions, industry players are facing an even higher level of uncertainty. For land vehicle suppliers, identifying ongoing trends and adapting to the change is crucial for future success. Figure 1: Military Land Vehicles Market: Vehicle Modernization Outlook FRES, OUVS, Warrior & Challenger CSP-United Kingdom Boxer-The Netherlands PUMA AIFV-Germany Future AIFV-Spain Freccia-Italy Stryker program, M113 replacement, Abrams/Bradley/Paladin capability Altay MBT-Turkey enhancement, Ground Combat Vehicle JLTV, FMTV-U.S.A K21 AIFV, K2 MBT-South Korea Leclerc, BMP-3 up gradation-U.A.E Abrams tank up gradation-Iraq Abrams MBT up gradation, Main Battle Tank Program-Colombia Piranha AIFV-Saudi Arabia Future MBT, Abhay AIFV-India Strategic Mobility Program-Brazil Project Vistula, Sepula, Hoefyster- Land 121, Project Overlander-Australia South Africa T55 MBT Upgrade-Peru What is Changing and What is Driving this Change? Declining Procurement Numbers After a costly decade of war, Western governments have understood the economics of operating a lean military force. Downsizing existing armed forces, replacing Cold War-era equipment and investing in new technologies are high priorities in the new defence strategy. In the United States, the Department of Defence (DoD) plans to cut the Army by 80,000 soldiers and the Marine Corps by 20,000 soldiers (some estimates even indicate a concerning 40,000). The projected defence spending cut in the next 10 years will be to the tune of $480 billion. Industry experts speculate there could be additional defence cutbacks, and Frost & Sullivan estimates this could be as much as $500 billion in the next 10 years.© 2012 Frost & Sullivan Page 2
  3. 3. Global Military Land Vehicles Market | Navigating the Changing Landscape of the Military Land Vehicles Market Market Insight Things are not very different in Europe. The United Kingdom, which played a crucial role in Iraq and Afghanistan operations, faced a defence budget deficit to the tune of $60 billion, leading to an aggressive Strategic Defence and Security Review (SDSR) to tackle this looming issue. The review recommended reduction of heavy armored vehicles. The existing inventory of Challenger main battle tanks will be reduced by 40 percent. In France, legacy vehicles like the AMX-10RC,VAB, ERC-90 are to be replaced by new VBMR and EBRC vehicles. Getting rid of legacy equipment is common in Europe and the United States, which is good for the industry. But the real challenge is in the form of reduced procurement numbers. The total active vehicles in 2012 are estimated to be 408,639 units, and this would increase just marginally to 418,109 units by the end of 2021. Frost & Sullivan analysis shows that new vehicle procurement numbers in the future will decline in traditional Western defence markets, though procurement numbers will increase in emerging markets in APAC and the Middle East. For suppliers, this means less opportunity to benefit from economies of scale. Suppliers can no longer rely on one country and will be forced to focus on multiple markets to remain profitable. End users are changing their focus to quality rather than quantity and place emphasis on low-cost, high-quality equipment. Striking a balance between both and offering an apt solution is the real challenge for suppliers. Figure 2: Military Land Vehicles Market: Procurement Units Comparison, Global, 2012 and 2021 Increasing vehicle procurement numbers in the non-traditional defence markets Decreasing vehicle procurement numbers 6000 in the traditional defence markets 5000 4000 3000 2000 1000 0 APAC Middle East Latin America Africa Europe North America 2012 2021 Source: Frost & Sullivan Analysis Possible Future Conflicts and Urgent Operational Requirements After an expensive decade of military operations, the U.S. and Europe will not be able to afford another major ground-based operation in this decade. The majority of conflicts in the foreseeable future are expected to be in the APAC and Middle East regions. Most conflicts in APAC will potentially involve China as a major participant. Due to the maritime nature of the conflicts, ground-based operations will be minimal in APAC. In the previous decade, vehicle suppliers enjoyed benefits in the form of urgent operational requirements (UORs). Due to a lack of significant ground operations, opportunities under UORs will be minimal. Suppliers need to focus on and drive planned procurement programs by proactively identifying end-user needs and offering solutions.© 2012 Frost & Sullivan Page 3
  4. 4. Global Military Land Vehicles Market | Navigating the Changing Landscape of the Military Land Vehicles Market Market Insight Emphasis on Vehicle Modularity End users are clearly inclined toward modular platforms, as they 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 means that the end user can use a single vehicle for different applications by just modifying (and configuring) specific components based on the requirement. This flexibility increases the popularity of modular vehicles. Frost & Sullivan expects the preference for modular vehicles to be high in the future. Alignment with Soldier Programs and Increased Digitization Interoperability with other battlefield systems is a top priority. Most nations have ongoing or upcoming soldier modernization programs. Large amounts of electronics are becoming a part of standard soldier equipment. The new vehicle must be able to support the modernized soldier in terms of troop transport capability, infrastructure to provide recharging for electronics, and similarity in battlefield management systems. The emphasis on network-centric warfare increases the need for vehicle electronics. Demand for more efficient vehicle electronic components is expected to increase significantly in the future. Asymmetric Warfare and Increasing Operational Pressures Drive a New Breed of Vehicles The changing nature of warfare and ever-increasing cost of military operations are forcing military planners to rethink their future vehicle capabilities. Most stakeholders agree that future military operations will be asymmetric and forces will have to operate in urban environments. Hence, future vehicles must have attributes enabling them to operate in urban environments with protection against contemporary threats in a cost-efficient way. Figure 3 Change Drivers Resultant Force Factors to Consider Network centric operations/Digitization Mobility and Protection Changing Warfare Need for Agile and Assymetric Warfare Adaptable Force Propulsion Military Operations in Transportability Urban Terrain (MOUT) Interoperability with Operational Fuel convoy attacks Pressures Other Elements Need for efficiency Logistics Footprint Hybrid threats Lifetime Cost Source: Frost & Sullivan analysis Mobility, modularity, protection, compatibility with other battlefield elements and efficiency are key attributes. End users are placing more emphasis on energy-efficient and easy-to-transport vehicles. The need for agile vehicles will boost demand for lightweight and hybrid vehicles.© 2012 Frost & Sullivan Page 4
  5. 5. Global Military Land Vehicles Market | Navigating the Changing Landscape of the Military Land Vehicles Market Market Insight What Does this Mean to the Suppliers? Slow Growth, Heavy Cost Burdens and Reducing Margins Frost & Sullivan research indicates that the global military land vehicles market is expected to witness a slow growth at a CAGR of 0.7 percent during the forecast period. The reason for the slowdown in the short term is mainly due to the market decline in the Western defence markets. Currently, the global military land vehicle market is being dominated by the United States. However, there are serious concerns about defence budget cuts and program reforms. It is expected that major vehicle programs in the U.S. will face cuts, and a decline of 1.5 percent is expected during the forecast period. The market is expected to regain growth momentum in the medium term as programs in APAC and the Middle East reach the procurement phase. In the Western markets, opportunities will continue to exist, but in the form of upgrades and capability sustainment. Figure 4 $41,000 $38,800 Revenues ($Million) $36,600 $34,400 $32,200 $30,000 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Years All figures are rounded. Base year is 2012. Source: Frost & Sullivan analysis There is an increasing emphasis on quality over quantity. Dwindling procurement numbers will pressurize the industry, as suppliers will find it hard to generate economies of scale. Lack of funding is a major restraint. The prototype development cost, which was earlier shared by government and industry, has now largely been passed on to the supplier. In light of all these factors, offering a cost-efficient solution will be a major challenge for the suppliers. While the MoDs are placing strong emphasis on reducing system acquisition and sustainment costs, commercial off the shelf (COTS) is a way to realize cost-savings. Commercial suppliers can leverage this opportunity to promote their solutions in the military domain. Over the past few years, the use of commercial off the shelf products has gradually increased and will encourage further commercial suppliers to offer military solutions.© 2012 Frost & Sullivan Page 5
  6. 6. Global Military Land Vehicles Market | Navigating the Changing Landscape of the Military Land Vehicles Market Market Insight Conclusion and Recommendations The global military land vehicles market has, without doubt, been adversely affected by the economic downturn. Uncertainty over the future may further impact vehicle modernization programs. Yet, Frost & Sullivan expects the market to be stable until 2021. Driven by economic growth and a strong need to replace legacy equipment, most APAC nations are expected to invest in vehicle programs. APAC will be the key engine for growth in the mid and long term. Frost & Sullivan analysis recommends that suppliers identify countries with a need to modernize and with budgets to implement it. Regarding the U.S. and Europe, although MoDs will continue to downsize their forces and will procure fewer vehicles in the future, there is and will continue to be a need to invest in sustaining existing capabilities. Countries in APAC and Middle East are expected to boost vehicle procurement volumes significantly over the next decade and offer suppliers the opportunity to make up for reduced spend in the U.S. and Europe.© 2012 Frost & Sullivan Page 6
  7. 7. Global Military Land Vehicles Market | Navigating the Changing Landscape of the Military Land Vehicles Market Market InsightFrost & Sullivan’s new report on “Global Military Land Vehicles Market Assessment” is available now. To learn more aboutthis report, please contact Mahendrana@frost.com or Aman.pannu@frost.com. About Frost & Sullivan Frost & Sullivan, the Growth Consulting Company, partners with clients to accelerate their growth.The company’s Growth Partnership Services, Growth Consulting and Career Best Practices empower clients to create a growth-focused culture that generates, evaluates and implements effective growth strategies. Frost & Sullivan employs 50 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from more than 40 offices on six continents. For more information about Frost & Sullivan’s Growth Partnerships, visit http://www.frost.com. www.aerospace.frost.com CONTACT US 877.GoFrost (877.463.7678) • myfrost@frost.com • www.frost.com

×