A Review of Historical Downturns in the Diesel Generator Sets Industry

The Dot.Com Bubble: 2001 - 02

The early days of the internet led to the creation of many start-up businesses online.  And just as in the data center sector today, many of them required a source of standby power, usually a diesel generator set, to avoid service disruption in the event of power outages.  Many of these generator sets were at higher ratings.  

These online start-ups held out the possibility of high returns on investment and attracted major investors.  But by mid 2000, it appeared that many were overvalued and burning through cash with no possibility of making a financial return.  A few of them survived to become household names today, but many did not.  

The bubble was starting to deflate, shrinking rapidly until 2002.  And the impact was felt in the diesel generator sets industry as businesses folded and orders were canceled.  The market for diesel generator sets declined by 10% between 2001 and 2002. 

But while the market at lower ratings dipped only slightly and recovered quickly, the greatest decline was felt at higher power ratings.  

At ratings above 1500 kVA, in 2003 the market bottomed out at 40% below 2000 levels, not recovering fully until 2006. 

Global Financial Crisis: 2008 - 09

Although its roots were in 2007-8, the global financial crisis impacted the diesel generator sets industry most strongly in 2009 as many projects and investment came to a halt.  

The diesel generator sets market declined around 18% by 2009, a 20% decline at ratings below 1500 kVA and around 13% decline above 1500 kVA.   

Europe, CIS and Latin America were particularly hard hit, declining more than 30% by 2009, China by 20%, with other regions declining 10 - 15%.

But recovery was relatively swift, especially at higher power ratings.  By 2010, projects that had been delayed were restarted and targeted economic stimulus packages were taking effect, with major focus on infrastructure investment to drive economic growth.  All of this helped the diesel generator sets industry.  Plus, the data center sector was starting to gain momentum.  

By 2010, the market was back to pre-financial crisis levels and the market at ratings above 1500 kVA was more than 25% higher.  

The Mini Recession of 2016

The mini-recession of 2016 had its roots in an almost 20% fall in the Chinese stock market, which spread to other regions and which was compounded by the uncertainty of the UK leaving the European Union in mid 2016.  A cut in oil production led to recessions in Brazil and Venezuela and in the Middle East and Africa, oil-producing countries saw lower economic activity.  

As investment was delayed, the diesel generator sets industry saw a decline of around 7% overall, an 8% decline at ratings below 1500 kVA and a 5% decline above 1500 kVA.

The markets most affected were in Africa  / Middle East, dropping 15 - 20%, Latin America dropping 10%, India and SE Asia, dropping around 6%.

By 2016, most of the government-backed stimulus packages implemented after the 2008 financial crisis had run their course and 2016 - 2019 was a period of low growth for the diesel generator sets industry, especially at lower ratings.  

Only in 2019 was there significant growth at higher ratings, and this was due mainly to greater activity in the data center sector.  

Covid 19: 2020

In 2020, Covid-19 lockdowns led to an 11% decline in the market for diesel generator sets.  

But the pain wasn't felt equally.  As more businesses and people became reliant on digital tools to work through lockdowns, the growing data center sector helped to protect the market at higher power ratings.  

• At ratings below 1500 kVA, the global market declined around 15% in 2020.

• At ratings above 1500 kVA, the global market declined only around 6%.

Across the regions, markets for diesel generator sets in North America and China were relatively unaffected, with low single digit declines, thanks largely to strong data center activity.  

But India and South East Asia declined around 20% and Latin America almost 40%.

Covid-19 was a relatively short shock to the market.  Recovery was quick and the world market was back at pre-Covid levels by 2021, although it was 2022 before Latin America, South East Asia and India fully recovered.