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overview Industry Revenue - Tanks & Armored Vehicle Manufacturing


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2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Industry Revenue


of military spending by the government, resulting in additional purchases of the industry’s related products. However, since 2011, defense spending has declined due to the winding down of combat operations in the Middle East and budget cuts, thus wiping out earlier increases. The passage of the Budgetary Control Act is expected to cut the defense budget by $487.0 billion between 2011 and 2021. Yet, with security risks in Eastern Europe, the Middle East and Asia picking up steam, the department of defense is projecting a modest 1.3% annualized increase for the department’s budget, some of which will go to ammunition manufacturers.


Consumer Spending Adjusts While budgetary cuts and a pullback from confl ict zones dramatically decreased gun and ammunition demand from the US military and local law enforcement agencies, strong consumer spending on fi rearms and ammunition kept in- dustry revenue expanding until 2014. Gun and ammunition sales to consumers are driven by a number of factors, yet the sharp spike between 2010 and 2013 was mainly attribut- able to fears regarding the possibility of tougher gun-control legislation from the Obama administration. The situation was exacerbated by recent mass shootings, such as the Sandy Hook Elementary School shootings, which increased the visibility of gun control talks, making potential legislation a greater possibility. In early 2013, the Obama administration unveiled a plan to address gun violence through the use of 23 executive actions and three presidential memoranda. The looming possibility of tougher gun control pushed consumers to purchase fi rearms and ammunition at re- cord rates. The number of FBI National Instant Criminal Background Checks (NICS) is currently above its historical levels. According to the FBI’s NICS database, the number of prospective buyers for fi rearms increased sharply in the fi ve years to 2015. However, since 2014, consumer spending on fi rearms has begun to decrease as fears of mounting gun regulation diminish. The number of NICS background checks


performed in 2014 dropped 0.6% and is expected to drop a further 3.5% in 2015, indicating that fears of stricter gun controls may have run their course as a strong revenue driver in the short term.


Trading Firearms and Bullets Exports generate about 35.6% of the Guns and Ammunition Manufacturing industry’s revenue. Although government demand for industry products is expected to


subside in the fi ve years to 2015 due to budget cuts, exports are anticipated to grow at an average annual rate of 2.5% during this period because of mounting global demand. This robust growth is forecast to continue over the fi ve years to 2020, allowing the United States to remain a net exporter of guns and ammunition. This anticipated growth will provide needed relief, which will counter receding government de- mand.


Domestic consumers, on the other hand, have shifted sharply away from imports for guns and ammunition over the past fi ve years. Consequently, during the fi ve years to 2015, imports are expected to decrease at an annualized rate of 3.7% to $2.5 billion. However, certain foreign players have been able to make inroads into the US domestic market. The industry gets a large portion of its fi rearm imports from Aus- tria and Italy, due to the popularity of the Glock and Beretta brands, respectively. However, Germany and the United King- dom are the most popular sources of imports of ammunition and ordnance products.


Moderate Outlook Expansion After record growth in civilian small arms and ammunition sales, demand is expected to continue moderating in the fi ve years to 2020. As the economy continues to accelerate, fears regarding increased crime and concerns about changes to gun laws are anticipated to subside, causing this segment’s growth rate to slow to a more reasonable rate. Further, the sequestration effects will continue to put budgetary pressures on law enforcement agencies. As such, these markets will remain constrained and unlikely to provide strong demand for manufacturers. As a result, many gun and ammunition manu- facturers, especially those that cater to military suppliers, will try to offset lower defense spending in the United States with more exports to growth markets, such as Asia, Europe and the Middle East. Consequently, IBISWorld estimates that


28 — Aerospace & Defense Manufacturing 2015


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