In 2016, two major fire truck manufacturer mergers were announced.This is only the beginning of a wave to impact the future of fire apparatus manufacturers.
Why the consolidation is inevitableMost industries are dominated where 2 or 3 companies have about 80% of the total market. (For the only industry that defies this trend, see below). The reason is that the manufacturers must get more efficient to sell to a consolidating fire service.
Although economic theory says that there will always be a unlimited amount of providers for a set of customers, the reality is that providers are limited due to:
- High start up costs - it takes a lot of money to start a fire truck manufacturer which limits new companies
- Lack of capital - It's extremely difficult to get the money to start a new apparatus manufacturer
- Regulatory burden - NFPA, OSHA, DOT and other rules certainly make a fire apparatus more safer and efficient. But these requirements raise the cost of manufacturing the trucks.
In the next 2 weeks, we'll discuss the pros and cons of a consolidated fire truck industry.
SummaryThe fire apparatus manufacturer industry is following a normal economic trend. The fact that it has resisted this trend for so many years is remarkable.
Answer: The only industry that defies the "big 2 or 3" is the pizza industry where most pizza is sold through small, independent businesses.
John R. Hill