SUMMARY: Our PowerTrackerTM dealer and distributor survey of 200 respondents reported that gen-set sales recovered some momentum in Q3 2020 up 11.9% from Q2 2020 levels. This increase follows a slow start to the year in Q1 2020 where overall dealer reported sales were down 9.8% from Q4 2019 levels and Q2 2020 where we observed a quarterly increase of 4.5% over the low Q1 2020 levels.
The only part of the market that seemingly did not recover in Q3 2020 was the diesel <20 kW with -8.3% for <10 kW and -3.6% for 10-20 kW. The remainder of diesel (>20 kW) had single digit quarterly increases across the power ranges. The gaseous fueled gen-sets had the most significant rebound this quarter with all power ranges up to 500 kW with a greater than 10% quarterly change – helping to offset the weak first half of 2020 as concerns and shutdowns ensued over COVID-19.
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.
Considering changes by application, Portables and Standbys carried the recovery this quarter with quarterly increases of 10.1% and 17.8% respectively. Demand in all other application categories remained relatively flat including Temporary, Peak Shaving, Baseload, and Cogeneration compared to Q2 2020 levels. This translated into a 13% increase in sales to Private Consumers and increases from 3% to 8% to Institutional, Commercial and Industrial end users.
On a Year-on-Year basis, overall unit sales for Q3 2020 were up 9.2% compared to sales levels in Q3 2019. This highlights the increase in demand or rebound as consumers have started to spend in 2020 after the slow start to the year with the onset of the COVID-19 pandemic.
In Q3 2020, dealers reported inventories declining by 8.3% from Q2 2020 levels. As demand has spiked in Q3 2020, many dealers reported they cannot get the product in to meet customer demands. The situation with residential and small commercial standby for gaseous fuels seems to have the longest lead times on product shipment to dealers. Year-on-Year, inventories are down 7.9% in Q3 2020. This is from a Year-on-Year change of 1% in Q2 2020 representing a total 8.9% change in one quarter when considering Year-on-Year inventory levels in Q3 2020 relative to Q2 2020. Again, this seems to be due to dealers not being able to receive needed inventories and not the case the dealers are hesitant to place orders for new inventory.
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 Q4 2020
Expectations of quarter-to-quarter sales growth in Q4 2020 varied depending on the power range and fuel type. Sales for diesel fueled sets are expected to be positive in the low single digits reflecting a slight recovery and fulfilling some of the commercial and industrial demand that has been withheld due to COVID-19 during 2020 year-to-date.
In contrast, sales expectations for gaseous fueled gen-sets will see some leveling in demand during Q4 2020 after the high sales levels observed in Q3 2020. Most ranges for gaseous fueled gen-sets are expected to be flat in Q4 2020 with the highest increase for the 301-500 kW range at 4.7%. This may reflect the same sentiment for diesel where commercial and industrial end users of diesel may start to spend after COVID-19 fatigue and a better sense regarding any looming business uncertainties.
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: Long lead times are hampering sales particularly with the smaller end of the range for residential and small commercial standby sets (<50 kW).
- Power Outages and Uncertainty: Many comments from dealers focused around some “fear-purchases” and general feeling of security which is driving many age groups – both younger working class and elderly alike, to consider a standby purchase for their home.
- Weather: We observed a variety of responses mainly due to regional considerations. Now that we are past a very active hurricane season and wildfires – this will dampen sales; dealers in other parts of the country are expecting the sales to increase due to winter storms.
- Election Effects: Normally we observe a relative slowdown during the second half of an election year leading right up to election; this year was different where there was less discussion from dealers citing a slowdown in sales until after the election. This may be an underlying factor in purchase decisions, but it has seemingly slipped away from the discussion as COVID-19 and weather (hurricanes) tended to drive the comments this 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:
- Significant increase in demand from residential for standby generators due to COVID-19 and also portables for recreational activities including camping.
- Many dealers reported long lead times from manufacturers. In many cases there is a short-term demand that may result in a lost sale if they cannot guarantee shipment within a certain timeframe.
- In previous quarter we reported that there was a reluctance to spend due to the onset of the pandemic; this has shifted as the pandemic has progressed with consumers now willing to spend and being less price-sensitive in many cases. PSR
Joe Zirnhelt is President and CEO of Power Systems Research.
