How Tariffs Could Potentially Impact the Generator Industry
With the upcoming proposed tariffs expected to go into effect, there is a level of uncertainty among many professionals in various industries. These concerns often revolve around questions regarding how these tariffs may affect businesses and how companies can attempt to mitigate how these tariffs may impact their business. While there are many obvious factors that come into play that can affect multiple industries, there may be some factors that may be overlooked when looking at the effects of tariffs on the market in a broader sense.
While there are many businesses that may seem bulletproof and may seem immune to negative impacts due to any tariffs imposed, there are less-thought-about industries that could be impacted that can affect the bigger picture for many people. One of them, of course, would be the backup generator industry. Often, when you think of a backup generator, you may think of the smaller units that you can purchase from Home Depot or Lowe’s, but let’s step it up from there. What about businesses and facilities such as data centers, hospitals, manufacturing facilities, processing plants, hotels, and grocery stores? Often, these types of facilities have a commercial generator (also termed an industrial generator) that help backup critical systems and infrastructure that can keep operations running even in the event of a power outage. With the occurrence of natural weather phenomena such as Polar Vortex, hurricanes, tornadoes, earthquakes, and other natural disasters, there is an increasing need for backup power systems for many that are in commonly affected areas. During extreme cold weather events and periods of extreme heat, there may be longer periods of high utility usage. Whether it’s electricity, gas, or other fuel/energy sources, usage usually increases greatly.
While this may seem obvious, maybe even trivial, it’s important to keep this in mind. The proposed tariffs may spill over and could possibly affect the generator industry.
Steel/Aluminum Industry
Steel and aluminum tariffs can not only potentially cause disruptions in supply chains for industries that rely on steel for production but can also result in increased costs overall. This would impact a variety of industries such as construction, automative, production, and – you guessed it – the generator industry. Commercial and industrial generators often use automotive engines as the core component. Often the heart of the generator set, the engine is what can ultimately dictate the maximum power output (horsepower/HP). Larger engines produce greater amounts of energy output, while smaller engines naturally have smaller energy output. As the automotive industry may be impacted, this could have a potential trickle-down effect on the generator industry overall, as the cost for parts and components may increase which will result in a higher cost of production and acquisition for new generators.
Some major components of generators are also made from aluminum, for example, generator enclosures. An increased cost in aluminum could potentially increase the cost of these enclosures greatly for new generators being produced. While steel may be an alternative, depending on the impact of tariffs, the cost of steel may not be much better.
Crude Oil and Natural Gas
While the proposed tariffs are thought to be miniscule and not expected to greatly increase cost for US consumers, it is important to note that most generators commonly rely on diesel and natural gas to operate and produce backup power. While the proposed tariffs may account for a small bump for increased costs, it’s important to keep this in mind for businesses with bigger facilities and facilities with lots of equipment that may rely on backup generators during events of power outage. These costs can add up over time depending on frequency and use.
Mitigating Impact
There has been an increase in many manufacturers and businesses looking for alternative suppliers if the proposed tariffs may affect their business. It is important to look for reliable suppliers that can help keep costs relatively low or come close to your price point. While this would be an ideal situation, it is not guaranteed and strongly urged that you exhaust all possible avenues and weigh out your options.
With the commercial generator industry, it would not be a bad idea for distributors, dealers, and wholesalers of new generators to consider stocking up and buying bulk. The market is ever-changing and nothing is guaranteed, but if the proposed tariffs may affect your ability to purchase new equipment, it would be advantageous to see whether stocking up existing new equipment on the market would work for your business model or not.
For those on the consumer side, the proposed tariffs could trickle down and potentially affect your ability to acquire a new backup generator. While the thought of this could be demoralizing for some, you do have options available. There are a number of generator dealers that currently have a large stock of brand new generators available and ready for sale. These generators are usually already pre-priced and will reflect pricing for the current market, whereas new generators produced after the tariffs go into effect may reflect pricing with higher material costs.
Additionally, you may want to consider a used generator. Used generators overall have a lower cost of acquisition when compared to buying a new generator. Regardless of whether you choose to purchase a used diesel generator or a used natural gas generator, used generators overall are generally a fraction of the cost when compared to new units. Used generators also have a much shorter lead time when compared to new generators. That’s because most used generators are available, serviced, and ready to go from a generator dealer. When it comes to new generators, unless a generator dealer orders new units for stock to have on hand, new generators are usually built to order by the manufacturer. This means that there is a waitlist, which also means there is an increased lead time. While these are some of the highlights of considering a used generator, be sure to see the many benefits of buying a used generator when compared to buying a new generator.
While no one can predict the future and understand how these proposed tariffs may affect the market, it’s important to keep up to date and observe the changing landscape as the tariffs go into effect.
If you’re looking for a new or used generator, reach out to us at Woodstock Power Company! We have a large inventory of brand-new Kohler generators in stock, many reliable used generator options in stock, and more on the way!
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We have industry experts that focus on generator sets, with in-depth industry knowledge to help you choose the right generator that fits your needs.
Our experts are ready to assist you from answering any questions you may have about power generator sets to helping you find the best selection in our inventory based on:
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