The global market for generator sets that are used for backup and onsite power generation has been extremely volatile in recent years. Due to falling oil and commodity prices, demand was weak in 2015, making it a difficult year for most suppliers.
Increased competition and overcapacity also contributed to a 12.6% decline in global generator set revenue in 2015, from US$17.9 billion in 2014 to US$15.7 billion in 2015.
The market is facing several challenges. Revenues are 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 capital expenditure (CAPEX) improves. Between 2015 and 2020, generator set revenue is forecast to grow modestly with a 4.3 percent compound annual growth rate (CAGR), to around US$19.3 billion.
Revenue from the infrastructure, marine and shipbuilding, oil and gas, and power industries is forecast to grow faster than average. Infrastructure and oil and gas (midstream) are expected to grow at a CAGR of 6.5% and 6.3%, respectively, from 2015 to 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 mergers and acquisitions that occurred over the past few years. Caterpillar remains a leading supplier, but its sales have slumped due to its 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 is still quite fragmented, with hundreds of small generator set assemblers vying for business around the world.
While the short term outlook is bumpy for generator set suppliers, growth prospects appear favorable from 2017 onward, assuming a return to higher oil price levels and increased capital investment.
Adapted from press release by Anna Nicklin
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