Generator sets market to see long-term growth

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30th August 2016

Source: IHS Markit

Being very temperamental in recent years is the global market for generator sets, used for backup and onsite power generation. 2015 for most suppliers was a difficult year, due to weak demand resulting from falling oil and commodity prices. Increased competition and overcapacity further contributed to a 12.6% decline in global generator set revenue in 2015, from $17.9bn in 2014 to $15.7bn in 2015.

The market is currently facing several challenges; as a result, revenue is forecast to decline by an additional 2.3% in 2016. IHS Markit projects a return to growth in 2017, as oil prices rise and industrial CapEx improves. From 2015-2020, generator set revenue is forecast to grow modestly with a 4.3% CAGR to around $19.3bn.

Revenue from the infrastructure, marine and shipbuilding, oil and gas, and power industry sectors is forecast to grow faster than the average, led by infrastructure and oil and gas (midstream) which are expected to grow at a CAGR of 6.5% and 6.3%, respectively, from 2015-2020. Large infrastructure projects across Asia and the Middle East will continue to drive generator set sales. The marine sector is also forecast to return to growth, after several years of decline.

Supply has become somewhat more concentrated, due to several mergers and acquisitions that occurred over the past few years. Caterpillar remains the leading supplier, but its sales have slumped due to the company’s heavy reliance on the oil and gas and mining sectors.

Generac has made several acquisitions, in an effort to expand outside of the North American market. However, supply to individual countries and regions are still quite fragmented, with hundreds of small generator set assemblers vying for business around the world.

The road ahead is bumpy for generator set suppliers in the short term; but growth prospects appear favourable from 2017 onward, assuming a return to higher oil price levels and increased capital investment.