China exported close to US$1.5 billion worth of generators and generator sets in 2005, 60 percent higher than shipments in 2004. This impressive growth is driven primarily by strong orders from the Middle East and Africa, and increased shipments to the US where a recent rash of power outages is spurring demand for emergency backup systems.
About 57 percent of the 92.2 million units that China exported last year consisted of generator sets ranging in output power from 650W to 10kW. These models are classified as portable power generators, about 90 percent of which are powered by gasoline and the rest by diesel.
The following are some of the key trends we see in China's portable power generators industry:
• The supplier base, which is engaged primarily in the manufacture of gasoline models, will be consolidating rapidly as makers unable to cope with fierce price competition and rising raw material costs close down or shift to other product lines.
• The entry of more suppliers into the production of diesel generators will result in the consolidation of this segment as well, as margins have already started to decline.
• More suppliers will be boosting business in the US and the EU by acquiring the necessary product certifications and offering industrial and commercial-use generators.
• Prices will remain relatively stable in the next 12 months because of intense competition. Any increase in price will be limited to 10 percent.
The Products & Prices section in this report discusses the key features of China-made gasoline and diesel generators. In addition, the section examines the engine and alternator, the two key subsystems that play a critical role in determining the price and market positioning of generators made in China.
Generator engine and alternator assembly are discussed in the Manufacturing section. This section also compares the differences between small, midsize and large suppliers in terms of production capability.
The R&D section examines suppliers' product development efforts, which are currently focused on meeting stringent environment-protection standards in the US and the EU.
The Industry Overview elaborates on the composition of the portable power generators industry in China, highlighting the key characteristics of the different types of suppliers.
The majority of the estimated 600 makers in the country are locally owned private enterprises, although there are a few foreign-invested and publicly owned companies.
Industry Overview
China's generator industry will consolidate rapidly in the next few years as intense price competition and increasing raw material costs continue to force many suppliers to close down or shift operations to other products.
This situation is particularly true in the gasoline-powered segment where about 100 makers closed down last year. These companies focused mainly on the low-end market and were unable to survive the losses they incurred from absorbing raw material cost increases in an effort to keep prices competitive.
In contrast, price competition in the diesel segment is currently not as severe. There are fewer makers fighting for market share, and most of them started production only in the past five years. This situation, however, may change in the next few years. More suppliers are entering the line and production costs are increasing.
This has already resulted in dwindling margins that could eventually lead to consolidation in the diesel-powered segment of the industry.
Despite the consolidation, China's exports are expected to continue growing with midsize and large suppliers filling the supply gap left by the closure of small companies.
The country's total exports of power generators and generator sets in 2005 exceeded 92 million units. The shipments were valued at US$1.5 billion, an impressive 60 percent increase over exports in 2004. About 57 percent of the shipments consisted of portable generator sets with output power of less than 10kW.
This jump in exports was driven mainly by strong demand from Africa and the Middle East. Sales to these markets exceeded US$417 million last year.
Large shipments to the US also contributed to the growth of China's generator and generator sets industry. Exports to this market amounted to more than US$323 million in 2005.
Growth strategies
Suppliers of power generators in China will continue to export to the Middle East and Africa, where demand for the product continues to grow. Their main objective for the coming months, however, is to strengthen their presence in markets such as the US and the EU. Makers are confident there is room for expansion in these markets. Demand for power generators in the US and the EU is growing because of recent incidences of power outages resulting from natural disasters.
Product development efforts therefore focus on meeting the stringent environment-protection and safety regulations in these developed markets. Besides cooperating closely with their buyers and component suppliers, many midsize and large makers of power generators in China are collaborating with universities and research institutes to develop additional safety features and lower exhaust emission and operating noise. Some are even commissioning foreign design companies to help develop a generator model, part or component.
These makers, especially those marketing products under their own brands, are emphasizing the quality and performance of their generators by securing certifications such as the Euro II, EEC and EPA on their own. This is in contrast with the common practice in the industry, which is to let buyers secure the approvals.
Supplier Profile
Chongqing Dajiang Power Equipment Co. Ltd
Drawing on more than 10 years' experience in engine production, Chongqing Dajiang began developing gasoline generators in 2001. These now account for about 20 percent of output and are available in 450W to 11kW versions.
More than 80 percent of output is exported, 70 percent on an OEM/ ODM basis and the rest under the in-house Ducar brand. Outbound shipments soared an impressive 450 percent last year after the company obtained EPA and CSA approval in September 2004 and May 2005, respectively.
Chongqing Dajiang projects export growth rate of more than 20 percent in the next 12 months. The US will continue to be the main target market.
The company is the power equipment-manufacturing subsidiary of Ducar Group. It also makes chain saws, lawnmowers, string trimmers, brush cutters, water pumps, sprayers and pressure washers.
Products
Seventy percent of gasoline generator exports are 2 to 5.5kW units. This product line includes low-noise 4.5 or 5kW models that operate at 65dB when tested at a distance of 7 meters. A standby control system automatically disconnects the generator from the outside circuit during power outages to start producing electricity. The feature also returns the generator to standby mode and reconnects it to the outside circuit once power is restored.
Other features include an automatic voltage regulator and digital overload protection, low-oil warning and remote control systems. Models come with a portability kit and are priced at US$990 per unit.
The in-house 30-member R&D team comes up with three new products and upgrades five to eight models every year. Chongqing Dajiang currently owns 10 patents.
Manufacturing
Chongqing Dajiang sources parts and accessories mostly from local suppliers of Briggs & Stratton and Honda, and imports electronic components from the US. The parts and accessories are first checked for various parameters such as hardness and dimension and then assembled in one production line. The engines are assembled in another line and are tested for speed and start function on six platforms. The units are also immersed in water to check air sealing.
All this column of information contained in China Sourcing Reports is the result of original, independent and impartial research conducted by Global Sources analysts.
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