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Mechanical, Electrical and Plumbing Services market report transcript
Electrical Mechanical and Plumbing Services Global Market Outlook:
MARKET OVERVIEW (2023 E)
GLOBAL MARKET SIZE: $1,186 BILLION
The global MEP market is expected to reach $1186 billion in 2023 and is forecasted to reach $1264 billion by 2025 with a CAGR of 3–4 percent
The MEP market is primarily driven by the increasing investment in construction. The global increase in population leads to more urbanization of many tier 2 and tier 3 cities, which requires a lot of infrastructural development
MEP services are being designed by various software, which enhances the multiple contractors working for different sub-services
The bigger challenge in MEP service is that the safety regulation keeps changing that the contractors have to complete the project before new regulations arrive
Cost Structure of MEP Services
The labor and overhead costs can contribute to 50-60 percent of the MEP contractor’s cost. Their gross profits range between 18-24 percent. The major overhead expense of MEP contractors typically rests with executive and administrative payrolls, reducing the net profit margins to 4-10 percent. Negotiation levers can be used to control the overheads and material costs as contractors tend to inflate material prices.
Porter's Analysis on Electrical Mechanical and Plumbing Services
The MEP services market is highly competitive with large global firms and regional medium and small-scale firms
Supplier power remains low to medium, based on the current economic conditions that are prevailing across the globe
Currently, the market is struggling, due to economic conditions, hence, suppliers/contractors are highly competitive in the bidding process
Over the next few years, the supplier power in the industry may gradually increase, due to the inflow of various capital projects from both the public and private sectors
Barriers to New Entrants
Barrier to entry remains high, due to:
– High upfront capital required
– Requirement of skilled workforce in a tight labor market
As the engineering and construction market is consolidated, new entrants from other geographical locations via possible mergers and acquisitions, which is less in the sub -sector
Building codes and regulations are highly complex, which has further raised the barrier
Intensity of Rivalry
The MEP service are a highly competitive market with several players, offering services
The market is highly dominated by top regional and global, who has high expertise in the engineering sector.
Leveraging the use of technology to provide better quality for the buyers and develop partnerships, to improve backlog period intensifies competition
Threat of Substitutes
MEP’s are one of the major essentials in construction industry and hence there is no substitutes for their role.
The only alternative position for buyers is to manage the MEP requirements internally, if they have any large investment plans for the near future.
High fragmentation in the market keeps the buyer power medium to high.
Buyer power typically depends on the level of investment by the buyers.
The evolving nature of service contracts such as the long-term relationship between the suppliers and buyers or combining multiple projects in a region would increase the buyer power.
There are capable regional/local medium to small scale MEP companies in the market and increasing the competition between incumbents suppliers to retain current contract at respective locations will give higher buyer power to small buyers.
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