The global market for generator sets, used for backup and onsite power generation, has been extremely volatile in recent years. For most suppliers 2015 was a difficult year, because of weak demand resulting from falling oil and commodity prices. Increased competition and overcapacity further contributed to a 12.6 percent decline in global generator set revenue in 2015, from $17.9 billion in 2014 to $15.7 billion in 2015.
The market is currently facing several challenges; as a result, revenue is forecast to decline by an additional 2.3 percent in 2016. IHS Markit projects a return to growth in 2017, as oil prices rise and industrial capital expenditure (CapEx) improves. From 2015 to 2020, generator set revenue is forecast to grow modestly with a 4.3 percent compound annual growth rate (CAGR) to around $19.3 billion.
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 percent and 6.3 percent, 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 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 is 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 favorable from 2017 onward, assuming a return to higher oil price levels and increased capital investment.