The Advancement of Urbanization Drives Increased Demand for Spare Parts and Increasingly Fierce Market Competition

Spare parts are replacement parts used for repair and replacement, as well as the products of industrial development and mass production of interchangeable parts. They are usually placed in inventory and used to repair or replace unqualified parts. Compared with parts, spare parts are used in fewer objects and only exist in monopoly exclusive parts and equipment. Spare parts manufacturing is a basic industry for the construction of the national economy, which products are widely used in various industries of the national economy such as automobiles, communications, transportation, energy, and machinery.

In construction, mining, cement plants, metal work, sugar factory and other fields, whether in maintenance or manufacturing, it is necessary to prepare some spare parts in advance for use in the near future. Among them, the construction industry spare parts market is the broadest, with a market share of 32.31% in 2019. On the contrary, sugar factories are less likely to use spare parts, and their market share is only 4.59%. It is expected that the construction industry spare parts market will further expand, and its market share will increase to 33.23% by 2025.

After a period of development in the spare parts industry, there are more and more market participants. The top three companies, Atlas Copco, Abato AB, and Caterpillar have markets all over the world. In 2019, they accounted for a total of 19.33% of the market share, which was 7.12%, 6.78%, and 5.25% respectively.

With the rapid development of the manufacturing industry, lean production, agile manufacturing and just-in-time production require enterprises to respond quickly to the market, which has become the fundamental guarantee for the survival and development of enterprises in competition. Spare parts are guarantee materials for the normal maintenance, overhaul and emergency of the equipment, as well as important materials to ensure the normal operation of the equipment. However, effective inventory management of spare parts is necessary to ensure the timely implementation of equipment maintenance activities. Therefore, in order to ensure the normal operation of production and equipment, the company will purchase a certain number of spare parts, which shows that the market demand for spare parts is extremely large.

Analysis on the Present Situation of Spare Parts Industry Under the Influence of COVID-19

Before the outbreak of COVID-19 epidemic, many companies had running projects or business expansion plans. However, COVID-19 epidemic has reduced activities in construction, mining, cement plants, metals, sugar factories and other fields, so the spare parts industry will also be affected, and demand will decline in the short term. With the spread of COVID-19 epidemic around the world, many global mining giants have suspended operations, and the demand and prices of commodities such as coal and iron ore are under pressure. Therefore, the world economic growth is also facing huge challenges.

In the manufacturing cost structure of spare parts, raw materials, R&D, labor costs and equipment accounted for 56.69%, 4.78%, 16.83%, and 8.74%, respectively. It can be seen that the production of spare parts is mainly restricted by raw materials. In addition, the industry is labor-intensive, so labor costs have a significant impact on the industry, too. During the epidemic, in order to prevent virus infection in the production process, companies imposed restrictions on the production environment and personnel. In addition, due to the impact of the epidemic, logistics is not smooth, and there are also problems with the supply of raw materials. It can be seen that COVID-19 epidemic has also had a serious impact on the upstream of the spare parts industry chain. As the supply chain may continue to be interrupted, the output value of the manufacturing industry may also be greatly reduced.

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With a developed economy, Europe is the largest revenue market, with a market share of 32.86% in 2019. North America and the Asia-Pacific region ranked second and third with a market share of 30.80% and 28.91% in 2019. South America, the Middle East and Africa have relatively low economic levels and smaller markets. In 2019, the market share was only 4.08% and 3.35%. However, the market in this region has great potential and will grow rapidly in the future.

The Asia-Pacific region has abundant labor with low prices, accounting for 60% of the global labor force, which has obvious advantages. In the past ten years, developing countries in the Asia-Pacific region, dominated by China, have achieved rapid development and maintained vitality and growth in the world economy. In the future, they will play an important role in promoting the growth of the global spare parts market.

The Development of the Construction Industry Will Continue to Promote the Market Demand for Spare Parts

The increase in demand for spare parts is mainly due to rapid industrialization. The continuous increase in mining services has laid the foundation for the needs of the spare parts industry, and the prospects are good. In addition, the improvement of living standards, the increase in expenditures on equipment spare parts, and the extension of the service life of existing machinery or equipment are some of the key factors, which may generate demand for spare parts in various industries such as construction and mining.

In 2015, the total revenue of the global spare parts industry market was 9078.8 million US dollars, which will increase to 10170.0 million US dollars by 2020. The market prospects for the spare parts industry in the future are broad. We predict that by 2025, the total market revenue of the global spare parts industry will reach 1,2545.3 million U.S. dollars.

Infrastructure investment is vital to both advanced economies and early-stage countries. For developing economies, infrastructure can have a truly transformative impact on citizens lives and business prospects along with road construction, power applications, and clean water installations. With the progress of urbanization, the investment demand for existing urban infrastructure is huge, so the scale of the world construction market continues to expand, which will also promote the increase in demand for the spare parts industry.

The spare parts industry is a typical manufacturing industry. The products on the market tend to be homogenized and price competition appears, leading to increasingly fierce market competition. At the same time, due to the rise of manufacturing in emerging markets, local spare parts manufacturers will compete. In order to solve the problems of high price of imported spare parts and long delivery time, manufacturers will choose to purchase local spare parts, which will undoubtedly intensify market competition. Therefore, global spare parts manufacturing companies should continue to absorb advanced technology, learn and innovate, improve product quality to participate in industry competition.

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