Pumping China: Potential for Growth in the Gear Pump Market
The hydraulic gear pump was invented in the 1600s. Since then, it has been used successfully around the world in a variety of applications. China’s hydraulic gear pump industry still offers businesses significant opportunities for success. This article will identify potential growth in this market by evaluating and discussing historical market trends, competition and driving vs. inhibiting forces.
Hydraulic gear pumps operate by creating pressure through the meshing of rotating gear teeth, which forces fluid around the gears to pressurize around the outlet area and push fluids through a displacement method. This article focuses on the two main variations of Gear Pumps:
- External Hydraulic Gear Pumps are usually found in lower flow applications. They use two side-by-side gears (spur, helical, or herringbone) that mesh together.
- Internal Hydraulic Gear Pumps consist of a smaller idler gear that fits inside of the larger drive gear. The internal configuration contains a crescent-shaped internal barrier that helps direct flow through the pump.
Chinese Market Overview
Over the past few years, the Chinese market for hydraulic gear pumps has increased steadily by 5% each year. The external and internal hydraulic gear pumps satisfy different application needs and have very little overlap in the Chinese market.
External gear pumps are more widely used in the construction machinery, agricultural machinery, mining equipment and automotive sector, due in main part to its higher dirt tolerance and lower pricing. Internal hydraulic gear pumps are more suited for applications where low-noise level plays an important role in the machinery’s requirement. These distinctions are clearly demonstrated in the chart below.
In terms of revenue, the internal gear pump market accounts for only 20% of the total market revenues, with its sales volume even lower at 4% of total market sales. Because of the high technological requirements of Internal gear pumps, many internal gear pumps are sourced from foreign suppliers that offer better technology at higher cost. This high cost in turn deters many end users from using internal gear pumps at all.
There are over 200 suppliers in the Chinese gear pump market, but only approximately 15 of those 200 supply internal gear pumps. Because so much of the internal gear pump market is imported from foreign countries with higher quality technology, it is difficult for domestic Chinese suppliers to gain entry. The internal gear pump market offers significant opportunity for the right company, however. The market has a higher growth rate and limited competition in China.
If a domestic company were able to reach the technological level of foreign competitors, they could supply internal gear pumps at a much lower cost to the end user, removing one of the barriers towards purchasing. Alternatively, a foreign company could save on transportation costs by manufacturing in China without sacrificing their high level of technology.
Opportunities vs. Inhibitors
In recent years, downstream markets have seen decreased growth and even shrinkage in some areas. Additionally, the prevalence of poor-quality and fake products have continued to damage consumers’ confidence in gear pumps and inhibit overall market growth.
Gear pumps also have lower volumetric efficiency compared to piston and vane pumps, which are frequently used instead of gear pumps. Although gear pumps with similar level of displacements tend to be relatively cheaper than piston and vane pumps, but it also tends to wear out more quickly and is generally not economical to repair.
On the other hand, internal hydraulic gear pumps have higher volumetric efficiency than plunger pumps, which are commonly used in machine tools. Over the next several years, there may be a substitution effect here. Government subsidies provided to the agricultural machinery industry may also encourage people to replace old machines and old components. GCiS China Strategic Research estimates a 4.9% growth in the Chinese gear pump market over the next 5 years, driven primarily by growth in the internal gear pumps sector.
The internal gear market offers the greatest opportunity for growth, with rapid growth expected in the near future. Because of the high technological barrier to entering this market, companies interested in succeeding in this market would need to invest heavily in R&D to establish a solid market presence.
As for the external hydraulic gear pump market, there are growth opportunities here as well, but given the higher number of competitors in this sector, companies looking to enter this market will have to assess their own technical competency to decide which sector would be most appropriate to their business model. The lack of high quality products from domestic manufacturers in the Chinese market is allowing foreign companies to earn high premiums from external hydraulic gear pump products with high working reliability and high efficiency in extreme circumstances.
Overall, the hydraulic gear pump market is expected to experience slight growth in the near future with the Chinese economy. Together with the backing of government policies, the gear pump market is expected to present some opportunities for companies to grow in the industry, especially the internal gear pump market. The market still remains relatively competitive; companies will have to consistently invest in research and development to retain their market position.