Research note: Latin American fire equipment market offers growing opportunities in automotive, hospitality, and transportation industries.
Many manufacturers are moving their production facilities out of the United States and across the border to Mexico and other Latin American countries, to take advantage of the lower cost of labor and an improving logistics network.
The Latin American fire equipment market is forecast to grow at a compound annual growth rate (CAGR) of 4.5% between 2015 and 2020. Despite tough economic conditions in much of Latin America, IHS has identified three industries that offer the largest growth opportunities for fire equipment manufacturers: manufacturing, hospitality, and transportation.
Many manufacturers are moving their production facilities out of the United States and across the border into Mexico and other Latin American countries, to take advantage of the lower cost of labor and an improving logistics network. This trend is particularly strong in Mexico, resulting in a high CAGR of 6.2% from 2015 to 2020.
The automotive industry, in particular, has made large investments in new manufacturing facilities in Mexico, including Toyota ($1 billion in 2015), Ford ($1.6 billion in 2016), General Motors ($3.6 billion in 2014), and Volkswagen ($1 billion in 2015). According to IHS Markit, annual automotive production in Mexico has increased by 1.2 million units since 2002 while output exceeded 4 million units in 2015. As of 2010, these new manufacturing facilities must comply with the Mexico Official Standard (NOM-002-STPS-2010), providing fire and safety standards in the work environment. These guidelines have been a boon to the fire industry, making fire detection and fire suppression systems mandatory and more comprehensive. Large international manufacturing companies are likely to invest in more advanced fire equipment, such as networked panels and multisensor detectors.
Hospitality is also a growing segment of the Latin American fire-detection market. International hotel chains tend to follow the highest safety standards—going far beyond what is required in many Latin American countries—and fire safety is a priority for most hotel owners, as it is important to make travelers feel safe. Minimizing the possibility of false alarms also improves customer satisfaction, which is why combination detectors, sprinkler systems (especially in Argentina, Chile, and Brazil), and voice alarms integrated with existing public-address systems are being used more often. This industry is also very ripe for retrofitting, as compared with other sectors that rely on new construction for most of their revenue.
Transportation is also growing rapidly. Many countries in Latin America are investing in logistics and public transportation infrastructure including airports and metro lines. In Brazil, for example, a new state-of-the-art terminal opened in Sao Paolo in 2014 and Metro Line 6—a 10-mile metro expansion project—is already under way. The metro project is a private-public partnership that is slated for completion in 2020. Planning for a new $13 billion airport is also taking shape in Mexico City. All of these projects commonly use premium equipment and require hundreds of devices.
All of these industries are expected to provide strong growth opportunities over the next five years, despite slow regional economic growth. Slower economic growth is expected to be a short-term issue, and the overall fire market is ready to thrive. The continued introduction of new legislation, enforcement of these laws, and a need for better overall fire safety will spur future growth across the region.
-Justin Siller, associate director at IHS Markit; and Tim Hewitt, analyst at IHS Markit. This article originally appeared on IHS Markit. IHS Markit is a CFE Media content partner.