By 2020, the global transformers market is expected to reach a valuation of $ 46.8 billion at a CAGR of approximately 7 percent. The rising demand for electricity all over the world and the increased infrastructure investment are two major driving factors for the growth of the transformers market. Replacement of old transformers with new ones in North America and Europe is another factor responsible for the growth of the transformers market.
What is the transformer?
A transformer is a device that is used for the transmission of electricity from one place to another. There are two coils present in a transformer that produces magnetic flux that leads to the conversion of alternating current to direct current. It works on the principle that electricity can be transmitted between two coils without them being in touch. A transformer can transmit, distribute and utilize alternating current (AC).
Transformers are mostly used for the purpose of increasing or decreasing alternating voltage in electrical power applications. Transformers comes in different size and are categorized based on their range of power.
The other applications of transformer include increasing or decreasing voltage or current. It also prevents direct current (DC) from transferring to another circuit.
Till the end of 2019, the Asia Pacific region is expected to dominate the transformers market with excellent growth prospects. Although, economic slowdown and the ban on mining activities in developing regions can have a temporary slowing down effect on the market.
By 2020, it is forecasted that the transformers market is expected to reach an average growth rate of approximately 6 percent per annum. The adoption of HVDC (high voltage direct current) transmission projects in the Asia Pacific region is a significant contributor to the growth of demand for large power transformers. This growth is due to the reduced transmission loss in HVDC transformers while transmission of electricity over large distances.
Starting a Transformer Business – Points to Consider
Before foraying into the transformer manufacturing business, there are many aspects that need to be considered.
- The local market may already have many other players that are engaged in similar trade. Knowledge about the services they are providing to the customer, their unique selling point and other factors should be considered before taking a decision regarding investment in the business.
- Conduct extensive research before investing in setting up a transformers business. Although there is a large scope of growth and expansion in the transformers market, one needs to consider whether the current market where you are going to invest is large enough to accommodate another company.
- The most important aspect before starting a business is that one must have knowledge about that business, this doesn’t mean one needs to be an expert in that but must have enough business knowledge to enter that market. Knowledge about the market can be gathered by interacting with different transformer dealers and manufacturers.
- One major obstacle that every businessman encounters while commencing a new business is the availability of investment. Make sure you have enough capital to start your transformers business. Along with the capital you also need to have space for setting up the factory or if you are thinking of trading in transformers and other components, then a suitable warehouse is required. You also need to take permission from the local authorities before setting up the manufacturing plant.
- Another aspect that one must not forget is the availability of raw material required for manufacturing transformers. There must be an availability of suitable machinery, equipment, tools, and accessories essential for the manufacturing of transformers. Maintenance and repair service providers must also be readily available to reduce breakdown time.
- An additional means through which one can start a transformer business is by taking a franchise of existing transformers companies. Customers tend to place more trust in products of already established and renowned transformer companies. Therefore taking franchise of a transformer company is another option to foray into this growing market.
Many emerging and developed countries such as China, India, Germany, and the UK are demanding a higher number of units of electricity. Governments are encouraging industries and utility service providers to replace old transformers with newer ones since these advanced transformers are equipped with modern grids for higher efficiency.
Many countries are looking for alternative and renewable energy sources such as wind energy, which will further increase the demand for transformers. Leading transformer manufacturers have shifted their manufacturing units to developing regions like China and India because of large demand and lower manufacturing costs. On the other hand, the volatility in prices and erratic availability of raw material like copper and iron could influence the market growth adversely.
With rapid industrialization, improving living standards and increasing expenditure on electricity generation, there are excellent growth prospects for any business engaged in the trade or manufacturing of transformers.