POWER GENERATION REPORT III
The Outlook for U.S. Gen-Set Production
Gen-SetRating 2009 2010 2011 2012 2013
<5kW 438,480 448,580 491,174 548,506 562,843
5 to 18 k W 114,758 117,221 129,213 142,409 146,703
18 to 50 k W 33,226 33,909 37,040 40,233 41,533
50 to 250 kW 23,621 23,962 26,022 28,106 28,897
250 to 500 kW 3977 4056 4403 4757 4905
Copper prices remain high and are a significant portion of the gen-set cost, so this adds pressure on producers to keep their prices high. The Import Factor Imports from low-cost sources con- tinue to make their way into the U.S. market. Some of the best-known names in the industry are now putting their name on small portables pro- duced in China and imported here. A quick stroll around the floor at last year’s Power Gen International show revealed that many small North American OEMs are teaming up with Chinese OEMs in private label agree- ments. The flooding of the U.S. mar- ket with Chinese-produced, low-cost units is a quickly evolving trend. Many Chinese companies have people here and have offices set up ready to do business. Statistics from the U.S. International Trade Commission indi- cate that Chinese imports into the United States in the less-than-500 kW market have skyrocketed over the past five years, reaching more than 870,000 units in 2009. Needless to say, as a result of that activity, the outlook for production of small gen-sets in North America is not good. The trend started several years ago as many small portable gen- set producers shifted production to Mexico. Many may remember Ross Perot’s response to the NAFTA agreement implying that the “giant sucking sound” is all of the jobs going to Mexico. Welcome to round two. Most of these OEMs have thrown in the towel on producing small portables in Mexico and
Source: Power Systems Research
Total 614,062 627,728
687,852 764,011 784,881 795,593
are now sourcing them from China. This evolving trend comes to light in a more personal story of a friend browsing an auto parts section of a department store in Mexico. As he was looking through all the parts and accessories on the shelf he was sur- prised to notice all these items dis- played the “made in China” mark. Without missing a beat, the Mexican customer next to him looked up with a smirk and said, “Yeah, there go all our jobs.” This is really an illustration of the economic cycle coming full cir- cle. Several years ago everyone thought that big sucking sound was coming from Mexico — actually it took a right turn — it was more of a jet stream coming from China. Areas Of Opportunity The logical question might seem to be “What’s left for North American OEMs to manufacture if they can’t compete on the lower-cost sets?” The answer lies in more sophisticat- ed equipment and opportunities to add value. Many North American OEMs now choose to source the base set in China. This sourcing is only one part of the equation, as there are still opportunities to add value. There are important premium parts of the market that are not suitable for the low-cost products. Future efforts may need to center around supplying the higher-value premium parts of the market because trying to be the low- cost supplier is really difficult. The market for small power gener- ation can presently be visualized as being delineated into two distinct continued on page 16
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