If you were hoping for COVID-19 to disappear from the news by the school year, it’s obviously not going to happen. With major companies like Google announcing they won’t be sending employees back to their offices until the summer of 2021 and COVID metrics climbing again in the South and West, we probably will be working on the impact of the pandemic well into next year.
It could almost be considered a truism to say that COVID-19 has been bad for business. The 33% annualized decline in GDP in Q2 2020 would apparently confirm that, and even the most positive about the economy must concede that a 9.5% single-quarter contraction is painful, to say the least. With businesses closed and housing starts in June lagging 4% behind last year, even with the brief reprieve when states began to reopen, the power generation segment has been hit hard by the pandemic.
Cummins, a giant in the industry, announced at the end of July that its revenues for Q2 2020 had fallen 38% from Q2 2019. That increased to 48% when looking at North America alone. Engine sales were down 47%, and power generation revenues declined by 37%. While Cummins was able to achieve positive net income because of a quick ramp-up in production in China after the worst of the virus had passed there, it was less than half of net income from Q2 2019.
But the effects of the pandemic on the power generation segment are not the same for every OEM. Generac was able to increase their Q2 2020 net sales by nearly 1% over Q2 2019. When the data is broken down by residential and industrial sales, it is not hard to see why Generac was able to achieve growth. While commercial and industrial sales were down 32.8% in Q2 2020, residential product sales were up 27.2% led by significantly higher sales of residential generators. Generac attributes this increase to a surge in awareness about the need for home backup power now that large numbers of people are working and learning from home.
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Even while the future of alternative fuel approaches and Generac prepares itself for solar and storage markets, they are still innovating within the existing power generation market. They just unveiled a 24kW generator with 70% the footprint, which translates into up to $8000 in savings on purchase and install. The generator also comes equipped with a home energy monitoring technology that Generac claims can save owners enough to nearly pay for the generator over its lifetime. This comes perfectly timed as the country appears to be submerging back under the first wave of the pandemic, and the first attempt at school openings in Georgia had 260 staff forced into quarantine within the first week.
Power Systems Research recently updated its Generac data and works continuously to update all of its data across its OE Link™, EnginLink™, and PartsLink™ databases to ensure that subscribers have the most up-to-date data on market trends and volumes. PSR
Tyler Wiegert is Project Manager and Power Systems Analyst
