SUMMARY: Gen-set sales in Q1 2020 fell 9.8% from Q4 2019, as the United States faces perhaps its most serious economic and public health crisis since the Great Depression. No power range was immune to the decline.
Sales in the 51-100kW range dropped 13%, the largest drop of any range, while the 101-300kW range faired the best, only shedding 6.5% of sales from Q4 2019.
The losses were felt fairly evenly across applications, with temporary power falling the least at 7%, and standbys the most at 10%. Looking by customer type, commercial sales had their worst first quarter in at least the last five years, falling by 9.5%.
The first quarter is not typically a strong season for gen-set sales, sitting in the gap between hurricane/winter-storm season and camping season, but recently, losses have never been so widespread across consumer type, power range, application, and fuel type.
On a Year-on-Year basis, overall unit sales for Q1 2020 were up 4.2% compared to sales levels in Q1 2019, which was marked by even poorer sales of portable gen-sets to private consumers.
The data comes from the proprietary PowerTrackerTM series of syndicated surveys conducted each quarter by Power Systems Research. A total of 1,100 interviews are completed each quarter with gen-set dealers and distributors and businesses across North America.
As a data company, we have been monitoring closely the effects of the COVID-19 pandemic on the power generation market. Jobs numbers can tell a lot, but PowerTrackerTM tells us what the people on the ground are seeing, and it isn’t good.
As mentioned above, sales declined 9.8% from Q4 2019. But because of how rapidly this situation is changing, we split our data set to Before and After the White House recommended social distancing and limiting public gatherings.
Before that recommendation, dealers reported a decline in sales of only 6.4%. The decline spiked to 12% after the White House recommendation. Between those two time frames, many power ranges fell from flat growth to double digit losses.
Dealer inventory levels before social distancing was widespread had been headed for a moderate increase of about 4%, but were in the red after distancing began, ending the quarter with a slight increase of about 1%.
As part of our PowerTrackerTM series, we also monitor gen-set sales trends by application. While standby and portable gen-set sales slightly outperformed the first quarter’s household demand slump from last year, it was still the next-worst first quarter for those applications in the last seven years.
Keep in mind that most of the losses related to COVID-19 happened well after the mid-point of the quarter, and it was still one of the worst first quarters since the Great Recession.
METHODOLOGY: Since 1998, Power Systems Research (PSR) has been continuously maintaining its PowerTrackerTM series of syndicated surveys, conducting 1,100 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 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.
Dealer/Distributor Outlook for Q2 2020
Given that much of the United States seems like it is still on the up-slope of this pandemic, it was somewhat surprising that dealers expect near double-digit increases in the <10kW, 10-20kW, and 21-50kW ranges for gaseous gen-sets and mid-single-digit growth for diesels in the power ranges between 101kW and 2MW.
But when the data is split around social distancing, a more negative trend again becomes apparent. Estimates for nearly all power ranges are revised sharply downward, sometimes by as much as 50% of the original projection. The standout is the 10-20kW range for gaseous gen-sets.
Dealers are expecting that the combination of an abysmal Q1 2020, the upcoming camping season (an activity that can be done even with social distancing), planned power outages to avoid wildfires, and general fear about COVID-19’s effect on society, will significantly boost residential demand for whole-home standby power.
They expect those factors to translate into a 17% boost for the power range, which is the largest expected Q-o-Q gain for that power range in the second quarter since we started collecting this data in 2002.
When asked, “Why do you expect sales to change in the upcoming quarter?” comments from dealers focused on the following market observations:
The first is that by summer, those orders will be lifted, and people will be eager to get outside. They are expecting a flood of customers buying generators for RVs and campsites. The summer outdoor season is always busy for most dealers, but the end of social distancing might bring a wave of newly minted outdoorsmen who are tired of the inside of their houses.
Coronavirus Keeps People Home: Of course, it is also possible that those orders will not be lifted so quickly. Power Systems Research is based in Minnesota, where the governor has said the models they have show that the peak in cases won’t hit until the end of June, and Minnesota is not the furthest back on the curve. Even if stay-at-home orders were lifted by the summer, it seems unlikely that consumers will suddenly feel comfortable being in crowded public places and rush to their local gen-set dealer. This may only serve to accelerate the trend toward online purchases.
Prepping for the Unknown: A third dimension to this is that that very uncertainty about when our lives will normalize is driving sales up in some areas. While this largely seems to be dovetailing with an existing anxiety about fires and summer storms in areas that have historically been hit by those, general uncertainty about the duration of the coronavirus crisis is leading some consumers to purchase more and larger backup power systems for their homes. We have already heard from some industry players that healthcare-related businesses are seeking to reinforce their backup power supply, but we are curious about whether businesses that have been designated as non-essential will feel increasing pressure to procure backup power for their employees’ homes the longer they are forced to work remotely.
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:
As the data show, that has not translated into new sales, because residential demand has largely evaporated as people are afraid to leave their homes and most businesses have closed. Unrelated to coronavirus, several dealers also reported a surge in interest in inverters, commenting that many consumers were willing to spend hundreds of additional dollars on them. PSR
Tyler Wiegert is a Project Manager at Power Systems Research (PSR), a market research and consulting company headquartered in St. Paul, MN
Phone: (651) 905-8400
E-mail: info@powersys.com
Web: www.powersys.com
