The power tools market has been rolling out the red carpet for innovations in every facet of ergonomics, tool design, battery performance, efficiency and productivity, and other connectivity technologies. Manufacturers are increasingly investing in cordless power tools in order to better place themselves for capturing value at stake in the highly competitive market.
Benefits of power tools such as greater efficiency and faster speed over other tools have brought them to the attention of industrials working in several sectors including, electronics, construction, automobile repair, maintenance and aerospace. Power tools also have become commonplace in commercial and residential spaces.
Experts, however, believe that the coronavirus (COVID-19) pandemic will be worse than the global financial recession of 2008. The crisis has put almost every industry at risk and, in turn, has exposed the power tools market to short-term uncertainties in supply and demand. The market witnessed a steep fall in both, demand and volume, during the first quarter of 2020 as the virus continues to rage across continents.
While the power tools market is slated to see a rapid recovery in Q4 2020, the demand will remain moderate in the near term as other economies steadily return to their pre-pandemic demand growth. Industry-adjacent sectors such as automotive, and construction are the primary end-users of power tools. These sectors have been fundamentally affected by the COVID-19 pandemic and thus, recovery is unlikely to happen in the immediate future.
Automotive Production at a Standstill
Factors such as rising private vehicle ownership and increasing spending capacity have been boosting the sales of automobiles, worldwide. Power tools in the automotive industry are used to perform a multitude of tasks such as cutting metal sheets and driving larger screws into tougher materials. In an effort to accelerate sales growth, automotive manufacturers all over the world are substantially capitalizing on power tools.
But that being said, the most critical and apparent effect of COVID-19 pandemic in the conventional automotive sector is the downtimes of many OEMs and manufacturing units that will perhaps produce about 7.5 million lesser automobiles in 2020. Within the automotive industry, the pandemic is a huge, once-in-a-lifetime disruption, and the situation is evolving swiftly.
Power tools are finding extensive applications in the automotive industry. The automotive industry was already going through a tough phase. Manufacturing halts across automotive hubs will measurably affect the adoption and demand for power tools within the end user.
In the long run, the crisis could have a prolonged impact on mobility as it triggers changes in regulatory trends, consumer behavior, technology, and macroeconomic environment. The expected recovery of the automotive industry is now delayed further. Thus, the damages sustained by the automotive industry will decrease the demand for power tools in the near term.
Delays in Construction Projects
The economic downturn of 2008 left a long-lasting and profound impact on the construction sector thus, waning the demand for power tools. Immediate responses encouraged economies to rapidly come back on track after 2009. As the construction sector got back on its feet, the demand for power tools followed an upward trajectory. Given the innate nature of business operations, some industries might unwittingly thrive under the pandemic, while some would pull through, although with much difficulties. But among the worst hit, the construction sector certainly is on the wrong end of the curve.
Power tool manufacturers have placed huge bets on the construction sector. 2020 has been a mixed bag for the end-use industry with delayed construction, project standstills, and skeptical buyer sentiment. This, in turn, has affected the demand for both, hand and power tools.
It all Comes Back to China
China – the manufacturing hub of power tools – has seen huge disruption in the supply of raw materials required for power tools, and other critical machinery. At present, the country manufactures about a fifth of intermediate products marketed in the global supply chain and Chinese products capture a substantial portion of the global value chain of the electrical machinery sector. That is why the chaos caused due to the COVID-19 recession in China alone is likely to echo on the global power tools market.
In the European Union (EU), the electrical machinery sector is touted to lose nearly US$ 1 from a 2% drop in exports of intermediate products from China. The European automotive industry is also expected to sustain similar impacts. A majority of electronics and automobile manufacturers have temporarily shut down their units or reduced the production capacity, resulting in loss to the global trade.
Italy has been severely affected, with most of the industrial northern region of the country following lockdown to curb the virus spread. Cases in the US have crossed a million, making the country the hardest-hit by the COVID-19 pandemic. This has put a strain on the US automotive industry with a decline in parts imported from China.
Global commerce and travel will be severely affected, supply chain management in Asia will continue to be disturbed, and buying decisions will be delayed due to fluctuations. All these factors are poised to hit the profit margins of power tool manufacturers until the containment of the virus.
Reimagining the Future of Power Tools Market, Now
The COVID-19 crisis is a humanitarian challenge that will have prolonged effects on how people live, play, and work. Social distancing has considerably changed the way people interact and inhabit the physical space. The ripple effects of the virus contagion have shrunk the demand for several types of space, perhaps for the first time in modern history.
Such transitions have created fundamental challenges for players in the power tools market. The longer the pandemic lasts, the more likely the market is to witness transformational and long-term changes in customers’ behavior. To respond to the urgent threat of COVID-19, and to set the stage to confront the possible permanent changes for the power tools market after the crisis, manufacturers must think proactively. By acting now, they could better serve end users and grow.
Author Nikhil Kaitwade works as Research Manager at Future Market Insights. With over 8 years of experience in market research and consulting industry, Nikhil has worked on more than 250 research assignments pertaining to chemicals, materials, energy sector and industrial automation and equipment sector. He has worked directly with about 35 reputed companies as lead consultant for plant expansion, product positioning, capacity factor analysis, new market/segment exploration, export market opportunity evaluation and sourcing strategies. Insights presented in the article are based on an ongoing study of Future Market Insights on the covid-19 impact on power tools.
Co-Author Vatsal Jain is an experienced market research writer, who works closely with the automotive and transportation and industrial automation and equipment vertical research team at Future Market Insights. With sound research skills and his own style of writing thought leadership articles, Vatsal extensively covers happenings in the aforementioned domains. Insights presented in the article are based on an ongoing study of Future Market Insights on the covid-19 impact on power tools.