Chinese warehouse automation market set to grow at CAGR of 13.5% over next 5 years

The Chinese warehouse automation market has fared well over the past five years, maintaining a market growth rate of around 16%, with steady growth expected to continue over the next five years, according to a new research report from market intelligence firm Interact Analysis.

In 2022, the Chinese warehouse automation industry was worth $4.72 million, compared with $2.59m in 2018, Interact's research finds. The parcel, durable manufacturing and general merchandise sectors have been largely responsible for driving this growth, registering CAGRs of 22.1%, 22.5% and 18.4% respectively. Between 2023 and 2027, the outlook for the market is still rosy as companies continue to look for ways to optimize efficiency on the factory floor, with a CAGR of 13.5% predicted by Interact Analysis.

International suppliers have played a significant role in China’s warehouse automation industry. However, Interact Analsys noted it is now beginning to see a gradual decline in the share of business taken by international suppliers, as domestic suppliers gain a competitive advantage. International suppliers held a substantial share of the Chinese fixed warehouse automation market in 2018, but this has been declining over time. This is largely because local suppliers have a clear price advantage compared with international vendors, Interact added. Furthermore, Chinese suppliers are often able to offer more flexible solutions that can be tailored to the needs of the customer and have greater knowledge of the Chinese market and economy, further boosting their competitive advantage. Chinese suppliers have also been successfully expanding into overseas markets.

“There are four main drivers of growth for the Chinese warehouse automation market," said Irene Zhang, senior analyst at Interact. "Firstly, China’s economic growth has remained strong over the past few decades, while, secondly, government support and promotion of warehouse automation has boosted the market significantly. Our research provides detailed analysis of government subsidies that warehouse automation suppliers have received, of which make up a substantial amount of their net profits."

As with many countries across the globe, labor costs continue to rise in China, Zhang added, which has led many companies to re-evaluate their strategy and implement warehouse automation solutions in order to reduce costs. Additionally, the localization of warehouse automation equipment has driven down the price of components such as sensors and PLC’s, further increasing Chinese vendors’ competitive advantage.

However, where there are drivers for market entry there are also barriers, Zhang added. "Project implementation cycles tend to be longer in China due to a lack of experience and expertise among some local suppliers, which hampers growth of the market," Zhang said. "Additionally, although labor costs are high, the labor force is plentiful in China compared with other countries, such as the US. This means there is an abundant supply of blue-collar workers and less of an incentive to invest in automation.”

Overall, the mobile warehouse automation market has grown at a faster pace in China than that of fixed warehouse automation, the Interact Analysis report also found.