Download our special report CORONAVIRUS, Impact on the global production for engines and powered equipment. Available April 15, 2020.
Over the first quarter of 2020 the concern over the coronavirus has grown each week. Since first hearing the news out of China and the virus’ spread to South Korea, we have been able to observe the effects on supply chains and production.
Time is of the essence
Although news and concern increased since that time, the week of March 10 and the classification of the coronavirus as a pandemic by the World Health Organization dramatically shifted many measures into action across the globe.
Ironically, during this same week, we at PSR were working to finalize our full-year forecasts for 2020 production in anticipation of our regular quarterly update/forecast.
Given the events of that week- and really each day since – we had to step back, take a fresh look and re-assess how we expect the 2020 year to unfold, given the most recent events related to the pandemic.
Worldwide, there is a high level of uncertainty, and it’s affecting the engine, alternative drive and equipment industries in different ways. The considerations and variables are many. For example:
- DEMAND. The robustness of demand for consumer versus industrial types of products will be different as the virus spreads and proactive measures to curb the virus will curtail demand sharply and quickly.
- PRODUCTION. Depending on the region of production, factory labor availability and the supply chain for parts and materials will be affected by local and country-level virus measures.
What we know now
Today, it appears that China is returning to a level of normalcy in operations but even returning to some sense of normalcy has presented challenges. There are many lessons to be learned about what can be changed and adjusted as this virus spreads into Europe, North America and South America.
We know that the experience of any two regions will not be the same, but there will be certain commonalities in effects on the production of engines and powered equipment. At PSR, we are working under the assumption that our assessments of the virus’ impact will improve as the virus progresses around the world.
What PSR has done
We at Power Systems Research realize this is the time when it is most important for our clients to have as realistic a view as possible concerning the most likely market effects in the short and medium terms. We have taken extra time to analyze and make our best assessment for the 2020 year, using our global team of analysts.
We realize that component suppliers and OEMs are announcing changes in production schedules and timelines with each passing day, but we have used what we know as of late March to assess how current mitigation strategies and demand changes will impact the annual production and sales of engines and equipment.
During this process, we have removed ourselves from considering only the quarter-to-quarter type influences, and we have attempted to consider and think in terms of how the short-term measures to fight the pandemic might impact the total annual production over the course of 2020.
In some cases, a loss of production over the course of a quarter may be made up over the balance of the year, but this depends on many factors, including any pent-up demand that might exist to boost orders and subsequent production. These are all factors we have considered as we have finalized our Q1 2020 update.
Our forecast for 2021 and beyond draws from our experience in studying supply chain disruptions from other regional and global crises which we have observed and tracked since 1976.
If you are facing new challenges or issues that require data-driven solutions, talk to us. We can be an important resource during your planning process in the months ahead.
Thanks for visiting our website. If you’re not a regular reader of our monthly industry report, PowerTALK™ News, you can visit the archive here. PSR
Joe Zirnhelt is President and CEO of Power Systems Research
