SUMMARY: Gen-set sales continued the growth trend in Q1 2018 with a 2% increase over Q4 2017 levels. We continue to see increased demand for residential standby after last year’s severe weather season as well as the ramp-up towards the construction and camping seasons.

This market increase was largely driven positive sales gains in the 21-100 kW range despite the anticipated contraction in sales <20 kW range after the hurricanes in late 2017. On a Year-on-Year basis, unit sales for Q1 2018 were up 15.3% compared to sales levels in Q1 2017.

The data comes from the proprietary PowerTrackerTM series of syndicated surveys conducted by Power Systems Research each quarter. A total of 1,400 interviews are completed each quarter with gen-set dealers and distributors, businesses and households in North America.

After two consecutive quarters of double-digit growth in the <10 kW range and near-double-digit growth in the 10-20 kW range, each of those power ranges experienced some softening of demand in the absence of any major weather events. As hurricane-driven emergency demand for those ranges eased, gaseous (gasoline, natural gas, propane) generators dipped in the <10 kW range by about 2%, and dropped by about 9% in the10-20 kW range, relative to Q4 2017 levels.

The largest quarterly gain in gaseous generators was 5% in the 51-100 kW range. After a flat Q3 2017 and moderate decline in all ranges >20 kW in Q4 2017, diesel experienced something of a resurgence with diesel sets >50 kW up 3% to 5% during Q1 2018.

Last quarter, we observed dealer inventories decline for the first time since Q1 2014, as dealers tried to meet the hurricane-driven emergency demand and OEMs shifted supply to Puerto Rico rather than replenish mainland U.S. supply. Dealers reported this quarter that OEMs had not yet returned to their previous supply levels, and we observed another quarter-on-quarter decline in inventories of 1.9%. Year-on-year, inventories were still up 6%, but that is the lowest increase since 2014.

As part of our PowerTrackerTM series, we also monitor gen-set sales trends by application type. As anticipated, the demand for portable and temporary gen-sets declined after the hurricane season passed, but by less than 2%, suggesting, as one dealer put it, that the effects of the last storm season “will trickle down for quite some time.” This can be seen in the 4% growth in standby sales, as well.

METHODOLOGY: Since 1998, Power Systems Research (PSR) has been continuously maintaining its PowerTrackerTM series of syndicated surveys, conducting 1,400 interviews each quarter among three key respondent groups in North America: gen-set dealers and distributors, businesses and households.

We conduct 200 interviews each quarter among dealers and distributors; the focus of this survey is on recent sales and market observations for the current quarter as well as expectations for the coming quarter.

Our Business Consumer survey consists of 900 interviews per quarter among a wide cross section of businesses to gather their input concerning ownership, usage trends and motivating factors for purchase, including any concerns about the reliability and availability of electric power.

Finally, our Household Consumer survey consists of 300 interviews per quarter to learn more about gen-set ownership trends among households and monitor the likelihood of a gen-set purchase.

Dealer/Distributor Outlook for Q2 2018

Dealers and distributors anticipate fairly strong growth in Q2 2018. Gaseous gen-sets are expected to experience the strongest gains in the 10-50 kW range with expected quarterly increases of 10% to 16%.  Additionally, for gaseous fueled gen-sets >50 kW dealers anticipate quarterly growth levels in the range of 3% to 5%.

The outlook for Diesel-powered gen-sets in Q2 2018 is also fairly optimistic with quarterly increases of 5% to 10% for power ranges >20 kW.  The only exception is for diesel fueled gen-sets in the 10-20 kW range dealers expect a decrease of approximately 5%, and for diesel sets <10 kW sales are expected to remain flat over the next quarter.

When asked, “Why do you expect sales to change in the upcoming quarter?” comments from dealers focused on the following market observations:

  • Upcoming Camping Season: As the long winter finally comes to a close, outdoor recreational activities will begin picking up. Numerous dealers cited the upcoming camping and RV season when explaining their expectation of growth in the <10 kW and 10-20 kW ranges. It is worth noting that dealers expect continued growth in these ranges on top of the high growth during the second half of 2017. Despite some drop-off in Q1, dealers do not seem to expect a return to the old trend line. As one dealer noted, “We have been amazed at how our sales have really been steadily going up. I don’t foresee it going down anytime real soon.”
  • Increased Demand for Standby: While one or two dealers attributed the growth in demand for standby power to unstable government and a desire to be prepared for a total failure of the power grid, most pointed to the ongoing effects of last year’s storm season. With the next hurricane season already beginning on June 1st, everyone ranging from millennials to 55+ are in the market for residential standby (21-50 kW). Larger standby units (301-500 kW), are also expected to grow, in part due to new regulations, like Florida’s recently-passed legislation mandating that all senior-living homes and assisted-living facilities have standby power by July 1st. See the April edition of our PowerTALKTM newsletter for more analysis.
  • Industrial and Construction Season: Expectations are positive for Q2 2018, with all power ranges expected to post growth in the range of at least 5%. Dealers pointed to the upcoming construction season and several cited large industrial projects they were currently quoting. Expected growth in the >21 kW power ranges is about on par with what dealers were expecting for Q2 2017. Interestingly, a few dealers also mentioned a return of oil & gas production in North Dakota as a reason to expect growth in the larger power ranges during the coming quarter.

When asked, “What changes have you recently noticed among particular customer groups or product categories within your market?” there were several comments that emerged as common themes.  Many of these are comments that have carried from quarter to quarter but the following is a sampling of some key observations:

  • Great desire for standby power across age ranges and customer types. Dealers are specifically citing hurricanes as driving this awareness.
  • More interest in natural gas gen-sets. Despite a drop in gaseous portables this quarter, gasoline and natural gas gen-sets increased their share of the market by about 1% each.
  • A strong economy and tax refunds are driving consumer spending
  • Price consciousness is pushing consumers to get multiple quotes, but ultimately buy online from foreign manufacturers or from big box stores

The sales index returned to a more modest level of growth, typical of what was seen in past quarters. Going forward, we will be watching to see if the recent surge has established a new baseline in the sales index, similar to the end of 2011.

Relatedly, we will be interested to see if dealers can capitalize on the new demand. Based on dealer responses, this seems largely dependent on lead times from OEMs to meet the demands of consumers who were either impacted by previous weather events or are proactively preparing for future outages. PSR

Tyler Wiegert is a Project Manager at Power Systems Research (PSR), a market research and consulting company headquartered in St. Paul, MN.