SUMMARY: Our PowerTrackerTM survey of dealers and distributors reported that overall gen-set sales increased in Q3 2021 up 4.3% from Q2 2021 levels. This builds on a sales increase of 6.8% in Q2 2021 and a slower start to the year of -7.4% in Q1 2021 as sales were constrained by availability and supply issues.
This quarter’s results were based on interviews with 110 gen-set dealer and distributor respondents based in North America. The overarching theme in the third quarter was a continuation of sales growth being constrained by the availability and supply of gen-sets. Longer lead times for dealers to receive shipments is limiting their sales – even though demand from end users remains at high levels.
The data comes from the proprietary PowerTrackerTM series of syndicated surveys conducted each quarter by Power Systems Research. Each quarter we interview gen-set dealers and distributors and other businesses across North America to maintain a pulse on the sales channels as well as monitor the ongoing needs and plans for businesses to purchase standby gen-sets to support their business operations.
Within gaseous fueled gen-set ranges, the <10 kW range had an increase of 1.3% after two consecutive quarters of decreases: -9.6% in Q1 2021 and -6.2% in Q2 2021. The 10-20 kW range experienced a more positive sales history over 2021 with 7.8% increase in Q3 2021 and a 7.6% increase in Q2 2021 after a slow start to the year with a 3.6% decrease in Q1 2021. Rounding out the <50 kW power range, the 21-50 kW range for gaseous fuels increased 7.4% in Q3 2021 after large Q2 2021 quarterly increase of 16.5%. Other power ranges within gaseous fueled gen-sets from 50-500 kW experienced quarterly increases ranging from 2.9% to 5.7% in contrast to Q2 2021 where quarterly sales were up 8.9% on average. Finally, the 501-1000 kW range for gaseous fuels was flat in Q3 2021 – following an up and down year where sales were up 9.6% in Q1 2021 and down 2.8% in Q2 2021.
Sales of diesel fueled gen-sets generally leveled off in Q3 2021 relative to the stronger rebound observed in Q2 2021. The only exception is diesel gen-sets <10 kW which have struggled over the last year with a reported decrease of 10.5% in Q3 2021 and marking five consecutive quarters of sales decreases going back to Q3 2020. Quarterly change across diesel <300 kW ranged from -12% to 9.6% while the 300-1000 kW range showed increases ranging from 6.3% to 9%. Finally, the upper power ranges from 1000-5000 kW diesel reported a 5% quarterly increase.
Looking by application, portables were down 2.4% from Q2 2021 levels reflecting a shortage and backlog of available units in the smaller gasoline units. Other applications were up in Q3 2021 including standby (10% increase), Peak Shaving (7% increase), Base Load (6% increase) and Cogeneration (18% increase). These increases for the “other” applications align with increases we have observed for quarterly sales of gaseous (i.e. natural gas) type of gen-sets >50 kW.
In Q3 2021, dealers reported overall that inventories declined by 6.8% from Q2 2020 levels. The quarterly decline in inventories for Q3 2021 continues a trend where overall dealer inventories have decreased on a quarterly basis going back to Q2 2020. As demand remains at relatively high levels a high percentage of dealers reported they cannot maintain supply to meet customer demands. Year-on-Year, inventories are down 41% in Q3 2021 which reflects that inability for dealers to replenish inventory during this time of higher demand and short supply/longer lead times. Over the last three quarters the overall inventory levels have maintained a level of approximately 40% lower than one year earlier. Again, this seems to be due to dealers not being able to replenish needed inventories and not the case that dealers are hesitant towards placing orders for new inventory.
METHODOLOGY: Since 1998, Power Systems Research (PSR) has been continuously maintaining its PowerTrackerTM series of syndicated surveys, conducting at least 300 interviews each quarter among two key respondent groups in North America: gen-set dealers and distributors, and business consumers.
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 100 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.
Dealer/Distributor Outlook for Q4 2021
Expectations of quarter-to-quarter sales growth for Q4 2021 varied depending on the power range and fuel type. Sales expectations for diesel fueled gen-sets less than 300 kW were mostly negative with the dealers selling <10kW units citing the largest decrease of 23% and the 101-300 kW range a slight decrease of 1.4%. The only brighter spot for diesel <300 kW is the 21-50 kW range estimating a 3% increase in Q4 2021 sales. Sales for diesel fueled sets above 300 kW are more positive with Q4 2021 sales expectations averaging 2.1% for the larger power diesel gen-sets.
Sales expectations for gaseous fueled gen-sets were fairly neutral across the power ranges with quarterly changes ranging from -3% to 3% expected for Q4 2021 sales. The only exception is the gaseous <10 kW sets which are expecting a decrease of -8.6% for Q4 2021 sales. This most likely is due to the dealer group’s belief that supply chain issues will continue to hamper sales for smaller gasoline gen-sets through the end of the 2021 year.
When asked, “Why do you expect sales to change in the upcoming quarter?” comments from dealers focused on the following market observations:
- Longer lead times for gen-set delivery to dealers: Like the past several quarters, 25% of dealers interviewed during Q3 2021 cited long lead times and lack of inventory as a reason their sales would be affected in the upcoming quarter. The supply chain issues plaguing the industry have translated into lack of available product and is impacting their sales pipeline.
- Weather and power outages: Over 31% of dealer responses noted either winter weather or concern for outages as reasons that their sales would increase in the fourth quarter relative to third quarter. Many dealers noted the possibility of winter weather events like ice storms as the direct attribution for an increase in sales. Others noted that an ongoing concern with an increased number of power outages over the last year combined with this threat of winter weather should translate into more inquiries and increased sales.
- Lower Sales Due to Seasonal Reasons: A trend working in the opposite direction as the weather and power outage concerns is just the cyclicality that some dealers experience during the fourth quarter. About 10% of dealer responses noted they expect decreases in sales due to seasonal reasons. This is primarily due to the non-residential customer groups where activity in the construction sector slows down during the winter months and the fact that end of year budgets have already been reflected into their third quarter sales estimates.
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:
- When asked what changes that dealers have observed among their customers nearly 40% mentioned “Nothing” but quickly followed this up with a comment surrounding “Nothing except for the fact that I can’t get product in at the moment”. While dealers overall may not be observing any larger trends in their customers groups, the lack of availability of product is right there on the top of their minds. We can attest to the overall level of frustration being experienced due to lack of available product within the dealer group. We do feel that dealers are really searching for that day when supply chain issues will get worked out enough and they will have more answers for customers across the board in terms of delivery timeframes that will keep the customer engaged and willing to make a purchase with an acceptable lead time for the desired gen-set. At the current moment dealers are, in many cases, not able to meet the customer expectations in terms of lead times and this is pushing off those incremental sales.
- As reported in previous quarters there is still a significant level demand from residential for standby generators due to COVID-19, more working from home and general security of energy supply concerns. PSR
Joe Zirnhelt is President and CEO of Power Systems Research.
