Diesel Generators Become a "Must-Have Rigid Asset" for AI Development

Surging Demand

Computing infrastructure such as data centers delivers services to society and requires continuous power supply to guarantee the safety and stability of data storage and processing, imposing extremely stringent requirements on electricity.

Several sets of statistics illustrate the pressure on the demand side. A McKinsey report released in June this year forecasts that the global IT equipment load demand for data centers will rise from approximately 82 GW in 2025 to 220 GW in 2030, with AI-related demand growing from around 44 GW to 155 GW. Huayuan Securities estimates that the global diesel generator market will reach about USD 22.6 billion this year, corresponding to demand for roughly 42,000 units.

The dramatic shift in demand is also reflected in higher configuration rates.

Traditionally, data centers deploy diesel generators under N+1 or 2N redundancy architectures, with configuration rates generally between 80% and 100%. To support intensive AI computing, advanced domestic data centers have lifted their diesel generator configuration rates to 120%–150%. This means data centers no longer settle for "barely sufficient" capacity; instead, they adopt higher redundancy to secure greater safety margins.

Order data from major global equipment suppliers further demonstrates the market heat. Zhou Yahong, General Manager for Greater China at Rolls-Royce Power Systems, previously stated publicly that 25% of the world’s data centers rely on the mtu 4000 series generators from Rolls-Royce Power Systems for emergency power backup. The company’s annual supply capacity in China stands at roughly 1,000 units, yet actual customer demand far exceeds this figure. Leading overseas players such as Cummins have fully booked production slots for high-power backup generators for data centers all the way to 2027–2028. Siemens Energy’s delivery schedule stretches even further, to 2029–2030.

According to reporters from China Energy News, the current lead time for mainstream global brands ranges from 8 to 12 months. The sharp expansion in demand is disrupting the long-standing supply-demand balance of the diesel generator industry.

Tightening Supply

Despite robust demand growth, the supply side struggles to meet immediate needs.

The global diesel generator market is highly concentrated. Production capacity for high-power large units is dominated by a small number of international giants including Cummins, Caterpillar and Rolls-Royce. Research from Soochow Securities notes there are only six major global suppliers. As industry orders flood into these firms, production capacity cannot be doubled in a short period.

Capacity expansion is challenging due to the long and complex industrial chain. Industry insiders point out that scaling up large engine manufacturing takes years. The supply chain covers large crankshafts, cylinder blocks, fuel systems and more. A large diesel generator set consists of thousands of components. From castings and precision machining to turbochargers and electronic control modules, coordinated expansion across the entire supply chain often takes several years. Bottlenecks in any single link will halt the whole production line, and downstream expansion requires massive capital investment that engine makers cannot resolve on their own.

Rolls-Royce Power Systems plans to double its global power generation business capacity between 2022 and 2028. The expansion of its Mankato plant in Minnesota was completed and put into operation early this year, with its capacity expected to hit 120% of the 2024 level. Caterpillar has raised its target for large reciprocating generator capacity expansion to three times its 2024 output. After expansion, its generator capacity will reach 65 GW, and power generation business revenue is projected to triple by 2030 compared with 2024.

Overall, however, international giants are cautious about capacity expansion for commercial reasons. A single large generator production line requires billions of yuan in investment. If the AI computing construction boom fades, excess capacity will turn into a heavy financial burden. Such concerns mean capacity expansion always lags behind order growth.

The caution of international players has directly translated into price hikes amid supply shortages. Generator sets adopting overseas components have seen price increases of roughly 20%, and fully imported original units now cost more than CNY 3 million. Industry sources indicate that as data center construction accelerates in the second half of the year, diesel generator prices may climb to CNY 3.3–3.5 million per unit within the year.

Huayuan Securities’ research report predicts that large-bore engines for data centers are entering a new round of price hikes. In this seller’s market, equipment vendors allocate scarce production capacity to the highest bidders, and inventory accumulated during the low-price era is being rapidly depleted.

Even operating at full capacity, overseas giants cannot ramp up production fast enough to match order growth. This creates an excellent window for substitution by domestic manufacturers.

Domestic Breakthrough

As international giants’ capacity expansion falls behind demand growth, domestic manufacturers are rapidly claiming their share of the market.

Statistics from the Data Center Committee of the China Communications Industry Association show that China’s demand for diesel generators for data centers will reach 5,600–6,000 units in 2025, leaving a notable supply gap. Domestic players Weichai and Yuchai are quickly capturing market share thanks to advantages in pricing and lead time. The domestic substitution rate has jumped from less than 20% in 2024 to above 30%.

Nevertheless, price and lead-time advantages do not automatically win trust. Xu Zhiyu, Data Center Architect at UCloud, commented publicly that customers tend to regard century-old overseas brands as highly reliable. If a supplier is not included in the bidding white list, service providers need to invest tremendous effort to gain user acceptance.

To tackle the trust barrier, major domestic internet companies have begun testing domestic equipment under extreme conditions: running generator sets at full load continuously for 240 hours, with partial operation at 110% overload. A senior expert from a leading domestic diesel engine enterprise stated bluntly that domestic units are now nearly on par with top international brands technologically.

Even greater potential lies in overseas markets.

In the first two months of this year, China’s export value of generator sets reached CNY 12.901 billion, a year-on-year increase of 49.66%. Among this, export revenue for high-power diesel generator sets for data centers surged by 131.81%. SUMEC’s export volume of high-power diesel generator sets rose by 50% in the first half of the year. Its export value jumped from more than USD 10 million in 2019 to over USD 100 million in 2025, with products successfully entering high-standard markets such as Germany, Switzerland and Japan. High-voltage high-power diesel generator sets independently designed and manufactured by Taihao Group have completed installation, commissioning and operation at a well-known data center in the United States, marking the first application of similar Chinese products in an American data center.

From capturing substitution opportunities to global competition, domestic diesel generator manufacturers are undergoing a transformation in the AI era. An industry analysis by the Data Center Committee of the China Communications Industry Association states that this is no longer a game of competition in a single segment, but a window to reconstruct the entire AI power guarantee chain. For domestic enterprises, besides deepening penetration in the data center market with cost-performance, fast response and local service capabilities, pursuing a “joint overseas expansion” model alongside computing power centers is also worth exploring.