Growth of Transportation and Logistics Boosts Demand
Raw Material Price Volatility Remains a Challenge
While demand conditions have been largely positive for Global Trailer Axle producers, fluctuating raw material costs continue to pose challenges. Steel is the primary raw material used in axle manufacturing. International steel prices fell sharply in 2019 but rebounded strongly in late 2020 and 2021 driven by supply constraints and rising demand from industries like construction. This volatility in input costs puts pressure on trailer axle companies' margins. However, larger players with strong supply chain relationships have managed to mitigate cost increases to an extent by negotiating fixed-price contracts or via hedging strategies. Going forward, the ability to absorb or pass on raw material price fluctuations will be key to profitability.
North America Leads in Trailer Production
Among regions, North America accounts for over 40% of the global market share due to high commercial vehicle production and usage. The US and Mexico rank among the top producers and users of trailers for freight transportation. Post-pandemic economic recovery has accelerated trailer build rates and fleet replacements in the continent. This has significantly benefited North American axle manufacturers. The aftermarket is also substantial for axle servicing, maintenance and replacement. Trailers in the North American heavy-duty trucking sector tend to clock high annual mileages and undergo more frequent repairs or upgrades. Leading axle suppliers like Meritor, Hendrickson, and Dexter have established manufacturing plants and supply chains catering to local OEMs and fleets.
EU and China Display Rapid Expansion
While North America dominates trailer axle demand currently, the European Union and China exhibit high growth potential. The EU is investing heavily in transportation infrastructure to strengthen intra-regional trade ties. Central and Eastern European markets are witnessing above-average economic expansion. This has spurred new trailer purchases and replacement cycles. Moreover, China imports and exports huge volumes of goods globally each year via coastal and overland routes. Swift industrialization and the ‘Belt and Road’ initiative have significantly boosted domestic trailer traffic. Both the EU and Chinese trailer axle sectors are projected to expand in the high single-digits annually over the next five to seven years.
Electric Components Proliferation Increases Complexity
Modern heavy-duty trailers incorporate a growing number of electronic systems for improved functionalities and telematics integration. They now interface with electronic control units, electric braking systems, and telematics hardware. In addition, progressive regions like the EU have mandated fitment of advanced driver assistance technologies on commercial vehicles that require auxiliary power and data connection from trailer axles. While this creates new revenue streams, it also increases product complexity. Their manufacturers must invest substantial resources in research & development for mechatronic solutions. They also need to integrate tightly with electronic and software partners. Achieving reliability in harsh operating environments poses an ongoing engineering challenge. Nevertheless, the electrification trend is opening up untapped growth potential for innovative axle providers.
Key Global Players Pursue Consolidation
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