Transformers Procurement Intelligence Report, 2024 - 2030 (Revenue Forecast, Supplier Ranking & Matrix, Emerging Technologies, Pricing Models, Cost Structure, Engagement & Operating Model, Competitive Landscape)
- Published Date: Jul, 2024
- Base Year for Estimate: 2023
- Report ID: GVR-P-10592
- Format: Electronic (PDF)
- Historical Data: 2021 - 2022
- Number of Pages: 60
The pricing and cost analysis helps in determining and projecting the actual cost of products or services over the forecasted period. It takes into account all the cost components and presents a competitive advantage during negotiations with suppliers. Additionally, the outcome helps procurement leaders identify fact-based and detailed cost drivers for the industry.
In this transformers procurement intelligence report, we have assessed the pricing of the major cost components such as raw materials, labor, equipment & tools, energy & utilities, logistics, and others. Other costs include R&D, compliance, warranty, rent, general & administrative, and marketing & sales.
As per data published by Federal Reserve Economic Data (FRED), the Producer Price Index (PPI) of ‘electric power and specialty transformer manufacturing’ in the U.S. stood at 333 in February 2023, ~20% up as compared to February 2022. Moreover, the same index rose further in February 2024, by ~10% (y-o-y growth). Key reasons for the rise in the index were increase in raw material costs, growth in labor costs, and escalation in energy costs during this period.
Suppliers in the transformers industry often use one of many pricing structures. Cost-plus pricing and volume-based pricing are two of the prominent pricing models being used. Other key pricing models such as competition-based pricing and demand-based pricing are also deployed in this industry. The cost-plus model guarantees that manufacturers cover their costs and achieve a profit margin. The volume-based pricing structure enables manufacturers to offer discounts on bulk purchases. The demand-based pricing enables manufacturers to optimize revenue and market positioning. For instance, during times of high demand, such as peak for construction seasons or periods of high energy consumption, prices of transformers can be raised to capitalize on buyers’ higher willingness to pay.
Key factors leading to variations in prices include raw material price fluctuations, design and specifications, demand and supply fluctuations, and transportation and logistics. For instance, the production of transformers relies on raw materials like steel, copper, and insulating materials. In 2024, shortages and increased costs of these raw materials due to geopolitical tensions, trade restrictions, and supply chain disruptions led to reduced supply and higher production costs. Similarly, transportation & logistics factors may include shipping delays, heightened freight costs, and import duties, all of which lead to a rise in the overall transformers’ prices.
Every company and its procurement unit look to bargain for the best deal while procuring a set of products or subscribing to a set of services. Rate benchmarking contains price/cost comparison of multiple sets of products/services to evaluate the most effective combination that can potentially assist the procurement team in getting the optimal rate.
In 2024, average prices of oil-immersed distribution transformers in China ranged from USD 500 to USD 20,000 depending on capacity and specifications, and those of dry-type transformers spanned from USD 1,000 to USD 12,000. Power transformers in China (in 2024) were priced between USD 30,000 to USD 170,000. During the same year, the average prices in India for oil-immersed distribution transformers spanned in the range of USD 800 to USD 17,000 based on capacity and design variations. Dry-type transformers in India ranged from USD 300 to USD 9,000. Power transformers in India fell within the range of USD 12,000 to USD 90,000.
To gain a comprehensive understanding of other aspects of rate benchmarking, please subscribe to our services and get access to the complete report.
Labor cost is one of the key components of the total cost incurred while offering a product or service. Therefore, an organization must decide whether the focus category should be retained in-house or outsourced if the organization is providing its products or services at competitive prices. If the organization decides in favor of outsourcing, it must understand the difference in the salary structures of suppliers before selecting a supplier and formulating a negotiation strategy.
According to our research, project managers working in ABB Ltd. and Hitachi Energy Ltd. receive a 10% - 15% higher base salary as compared to the salary received by Project Managers working in Eaton Corporation plc and Mitsubishi Electric Corporation. However, the year-on-year increment rate majorly depends on the Key Result Areas (KRAs).
Organizations may find it burdensome to constantly track all the latest improvements in their supplier landscape. Outsourcing the activities related to collecting intelligence allows organizations to focus on their core offerings. At this juncture, our newsletter service can help companies stay up to date with the latest innovations and developments and subsequently support in preventing disruptions in the supply chain. We have identified the following developments within the transformers industry over the last two years:
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In June 2024, Hyosung Heavy Industries announced its plans to augment its ultra-high voltage transformer manufacturing facilities in both the U.S. and South Korea, in response to the rising global need for electricity infrastructure. Under this plan, the company aims to broaden its existing testing and production capacities at its factories/plants based out of Memphis, U.S. and South Gyeongsang, South Korea.
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In February 2024, Hitachi Energy made an investment of more than 30 million euros to enhance its transformer operations in Germany. This investment involved the expansion and modernization of its power transformer manufacturing facility located in Bad Honnef. This initiative not only strengthens Hitachi’s global presence and capabilities but also responds to the rising transformer demand across Europe.
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In February 2024, Siemens Energy unveiled its plans to address the power transformers shortage throughout the U.S. by committing USD 150 million for expanding its operations in Charlotte, North Carolina. As a part of this plan, Siemens Energy plans to augment its current facilities by constructing transformer plant in Charlotte. This project has received backing from a Job Development Investment Grant (JDIG) provided by the state of North Carolina.
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Add-on Services
Should Cost Analysis
Component wise cost break down for better negotiation for the client, highlights the key cost drivers in the market with future price fluctuation for different materials (e.g.: steel, aluminum, etc.) used in the production process
Rate Benchmarking
Offering cost transparency for different products / services procured by the client. A typical report involves 2-3 case scenarios helping clients to select the best suited engagement with the supplier
Salary Benchmarking
Determining and forecasting salaries for specific skill set labor to make decision on outsourcing vs in-house.
Supplier Newsletter
A typical newsletter study by capturing latest information for specific suppliers related to: M&As, technological innovations, expansion, litigations, bankruptcy etc.
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