In 2012, the global armoured vehicles MRO (maintenance, repair and overhaul) market was valued at $4.1 billion and this is expected to increase to $7.1 billion by 2022, representing a CAGR of 5.68% during the forecast period (see Figure 1).
The demand for armoured vehicles MRO services is predicted to be driven by aging military equipment worldwide, technological innovations in the industry, internal and external security threats, territorial disputes and modernisation initiatives undertaken by armed forces across the world. Cumulatively, the global market is expected to reach a value of $57.6 billion during the forecast period and is expected to be dominated by North America, followed by Asia-Pacific and Europe. Despite the economic crisis in Europe, its share of the global market is projected to increase, albeit marginally, due to the scheduled deployment of various modernisation programmes.
The armoured personnel carrier (APC) MRO market is expected to account for the highest proportion of spending in the global armoured vehicles MRO market, followed by markets for main battle tank (MBT) MRO, mine-resistant ambush protected (MRAP) vehicle MRO, and tactical trucks MRO (see Figure 2). The APC MRO market is expected to account for 42% of the global military armoured vehicles MRO market, followed by MBT MRO with a 28.2% share, MRAP MRO with 17.5%, and tactical trucks with a share of 12.2%.
North America dominates global armoured vehicles MRO market
North America accounts for the highest expenditure in the global armoured vehicle MRO market (see Figure 3) and the majority of this expenditure can be attributed to the US, with Canada accounting for a small share. Since the US has been engaged in continuous military operations in Afghanistan and Iraq, along with Canadian forces, a large number of its armoured vehicles have undergone significant wear and tear. Also, most of the US fleet of armoured vehicles has an average age of 14 years.
This is expected to attract significant MRO investments in the country's armoured vehicle market in order to modernise its fleet, which includes M1 Abrams tanks (average age 13 years), Bradley Fighting Vehicles (average age ten years) and M-113-based vehicles (average age 13 years), among several others. The US Army aims to maintain the average age of its armoured vehicles at, or below half, of their service life by continuously upgrading them to match the capabilities of the latest models and by incorporating technologies from the Future Combat Systems programme.
The recent US defence budget cuts are not expected to have a significant impact on armoured vehicle MRO spending, since the US Department of Defence (DoD) is committed to maintaining the readiness and performance of its active fleet, which in turn necessitates the implementation of upgrades to older vehicles deployed in the battlefield or that are still serving.
Due to these factors, North America spends the most in the armoured vehicles MRO sector, accounting for 43% of the global market. Major programmes include the upgrade of International MaxxPro Mine Resistant Ambush Protected (MRAP) vehicles and Caiman MRAP vehicles, and the recapitalisation programme for 60,000 or more mobility multipurpose wheeled vehicles (HMMWVs).
Asia and Europe are also expected to account for a significant portion of the total armoured vehicle MRO market during the forecast period, with shares of 29% and 13% respectively. This will be driven to a large extent by the efforts of countries such as China, India and Russia to modernise their armed forces. Africa, Latin America and the Middle East cumulatively account for 15% of global armoured vehicles MRO expenditure.
APC MRO market to witness the highest spending in the global armoured vehicles MRO market
The global APC MRO market is expected to witness robust spending over the forecast period, mainly due to investment in the acquisition and development of APCs. These are in high demand as they can be used to perform multiple roles such as troop transport, equipment transport and attack. The majority of this spending is expected to be on maintenance, followed by upgrades or overhauls and repair services.
Furthermore, countries are looking to cut costs by cancelling APC acquisitions, opting instead to overhaul their existing fleet. The global defence industry is therefore investing significantly in R&D in an effort to increase its armoured vehicles MRO capabilities. Companies such as Industrial Vehicles Corporation (IVECO) are leveraging their skills to branch out into military vehicles MRO and tap into a burgeoning market.
Demand for APC MRO in the US to support global armoured vehicles MRO market
In 2012, spending in North America on APC MRO is expected to be $470 million, and is set to increase at a CAGR of 7.27% during the forecast period to reach $948 million by 2022. The spread of US forces acting as global and regional security providers across the globe, as well as the wars in Iraq and Afghanistan, have resulted in a strong demand for APC vehicles, leading to a depreciation of the APC vehicles used in these missions. As such, it has become imperative for the US DoD to channel a major portion of its expenditure towards this segment.
Moreover, major operations are mainly focused on counterinsurgency. This makes protecting vehicle crews from IEDs and RPGs a priority and is another major reason for upgrades and repairs to APCs. A major initiative in this segment is the performance-based logistics (PBL) contract aimed at upgrading 245 Bradley Operation Desert Storm Situational Awareness (ODS-SA) vehicles.
Budget cuts and global economic crisis not expected to affect armoured vehicles MRO market
The global economic slowdown has reduced the defence budgets of most leading spenders in the world including France, Germany, the UK and the US. However, these budget cuts have boosted the armoured vehicles MRO industry, as countries look to maintain, repair and upgrade their existing fleets rather than buy new equipment. High-growth markets such as China and India have been enhancing their armoured vehicles MRO sector. Further evidence of this trend is the fact that a market as small as Africa is expected to show positive growth during the forecast period.
Global armoured vehicles MRO providers to venture into joint research and development
The global economic slowdown has led to a significant number of countries establishing joint projects in order to share R&D costs. Partnerships between defence firms have also increased as a significant number of countries invest in their domestic armoured vehicles MRO capabilities through strategic alliances and technology-transfer agreements.
Examples include ST Kinetic's joint venture with DSO National Laboratories to undertake research and technology development in advanced materials, primarily for armoured vehicles MRO. As part of the warrior capability sustainment programme (WCSP), Lockheed Martin has formed a partnership with companies including Ultra Electronics, the Defence Support Group, SCISYS, Rheinmetall Defence, Curtiss Wright, Thales UK, Moog, Meggitt, CTA International, Westwire, TKE, MTL, and Caterpillar UK, to carry out various forms of MRO work.