The exponential growth of global AI computing power is strongly driving the diesel generator market into a period of robust prosperity. As the core backup equipment ensuring the security of computing power, diesel generators are witnessing an explosive surge in market demand. Relevant data show that from 2024 to 2027, China’s demand for diesel generators supporting the smart computing power sector will soar from 4,426 units to 12,327 units, and the market size is expected to surpass the 50 billion yuan mark.

Zhu Jianming, Chairman of the Expert Committee of the China Internal Combustion Engine Industry Association, stated bluntly: “The explosive growth in AI computing power is, at its core, an ultimate test of the ability to provide power and propulsion in the physical world. Although diesel engines may seem traditional, they have established a technological moat that new energy sources cannot easily replicate in the short term—particularly in terms of power density, response speed, and reliability in extreme environments. This is especially true for large-bore models, which directly determine the computing power safety of AI data centers.”

Surging demand and domestic breakthroughs proceed in parallel.

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Chinese enterprises are achieving a strong breakthrough, with the domestic substitution rate rapidly rising from nearly zero to over 30%.

Currently, the supply side of the market exhibits the characteristics of "high barriers to entry and a continuously widening supply-demand gap." Leading overseas company Cummins released an industry forecast indicating that the global data center generator market is set to enter a period of sustained growth. The market size will steadily increase from $6 billion in 2023 to $9 billion in 2026 and further climb to $12 billion by 2030, presenting considerable room for expansion. In Caterpillar’s third quarter of 2025, sales in this segment reached $8.4 billion, representing a year-on-year increase of 17%. Data center power systems are the core driver of this growth.

Under the current wave of rapid market expansion, overseas supply chains have already shown clear signs of strain.

In a report, Huang Xili, an analyst at Dongwu Securities, pointed out that there are only six major global suppliers, and it takes foreign companies 1 to 2 years to expand production. As a result, the growth rate of supply falls far short of the 40% growth rate in demand. From 2027 to 2030, global data center capacity demand is expected to exceed supply by as much as 500%, ensuring that the shortage situation will persist for the long term. He predicted: “Breakthroughs in AI technology will drive a substantial increase in capital expenditures by global cloud service providers. By 2025, China’s diesel generator market is forecast to reach 12.5 billion yuan, representing a year-on-year growth of 53%. From 2024 to 2028, the compound growth rate is expected to remain at 22%. Meanwhile, foreign manufacturers are being cautious about expanding production, with order backlogs already scheduled through 2026—providing domestic manufacturers with an excellent window of opportunity to step in as substitutes.”

Against this backdrop, Chinese enterprises have achieved a strong breakthrough, with the domestic substitution rate rapidly rising from nearly zero to over 30%. Leading companies such as Weichai Power and Yuchai International, leveraging their technological breakthroughs and production capacity advantages, have become key players in the market. In 2025, Weichai’s sales of engines dedicated to data centers surged by 491% year-on-year. Meanwhile, Yuchai has expanded its reach into the Southeast Asian market through its Vietnamese plant, with overseas sales from January to November 2025 increasing by more than 50% compared to the same period last year.

Fabrizio Mozz, Deputy General Manager of Weichai Group and CEO of French company Baudouin, told a reporter from China Industrial News: “Weichai Baudouin is confident—and even more capable—of becoming the fifth core manufacturer to enter the high-power product segment for data centers.” This confidence stems from Weichai Group’s R&D investment of over 30 billion yuan over the past five years, as well as the deep integration between its Chinese and French technical teams.

The export market also performed exceptionally well. According to data from the China Internal Combustion Engine Industry Association, from January to November 2025, China’s generator set exports reached US$6.042 billion, representing a year-on-year increase of 24.98%. This growth rate significantly outpaced the overall 11.31% growth rate of the internal combustion engine industry, making it a key driver of the industry’s export expansion. Huang Xili told a reporter from China Industrial News: “Domestic manufacturers have clear advantages in terms of production capacity expansion speed, pricing, and response efficiency. Their product prices are 10% to 20% lower than those of foreign-funded enterprises, and they can deeply tailor their products to meet the scheduling needs of domestic AI data centers. We expect that in the next three to five years, the domestic substitution rate will rise to over 50%.”

Industry insiders believe that the core competitiveness of domestic manufacturers is concentrated in three key areas: their delivery cycles are only half those of international manufacturers, with some standard models deliverable within one month; their prices are 15% to 30% lower than those of international brands, and their operation and maintenance costs are reduced by more than 20%; they can deeply integrate with AI-based scheduling systems to optimize load distribution, demonstrating stronger technical adaptability. Meanwhile, supportive policies are providing robust backing—under the “East Data, West Computing” strategy, a surge in construction demand has emerged, while R&D subsidies and tax incentives for high-end equipment manufacturing further safeguard and promote the rise of domestic enterprises.

The transition from mechanical equipment to intelligent systems

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Digital transformation has become the core competitive arena in the diesel generator industry, fundamentally altering the single attributes of traditional mechanical products and driving their upgrade toward intelligent equipment that can “sense, think, and respond.”

“The widespread adoption of diesel engines is not a reverse flow of technology,” said Zhu Jianming. “Their core value in ensuring the security of computing power stems from the organic integration of traditional mechanical reliability and modern digital technologies. This innovative fusion has made diesel engines the ‘powerful cornerstone’ underpinning the stable development of the computing power industry.” Today’s diesel generators are no longer mere mechanical products in the conventional sense; they are no longer isolated devices driven solely by fuel power. Instead, they have evolved into a new type of power equipment that deeply integrates digital and intelligent technologies.

Digital transformation has become the core competitive battleground in the diesel generator industry, fundamentally altering the single attributes of traditional mechanical products and driving their upgrade toward intelligent equipment that can “sense, think, and respond.” This transformation is by no means a simple combination of “mechanics plus chips”; rather, it involves the seamless integration of data links across the entire product lifecycle and deep technological convergence.

At Weichai’s production site, reporters directly experienced how predictive maintenance technology has become a core application scenario for the digital transformation of diesel generators. Technical personnel use sensors to capture over a hundred key operational parameters of equipment in real time, and then combine these data with AI algorithms for intelligent analysis, enabling them to accurately identify faults at the earliest possible moment. This technology represents a complete upgrade from the traditional “reactive maintenance” model to “predictive maintenance,” significantly reducing equipment operation and maintenance costs and effectively mitigating production losses caused by unplanned downtime.

Liu Xue, representing Beijing Century Interconnect Broadband Data Center Co., Ltd., revealed at the “2025 China Internal Combustion Power Generation Equipment Industry Annual Conference” that “companies are building digital systems for diesel engines centered on data-driven approaches, breaking through the traditional limitations of isolated and silent operations. By collecting comprehensive, multi-dimensional data and leveraging intelligent analytics, these systems are being upgraded into core power assurance units that are transparent and monitorable, intelligently controllable, and capable of predictive early warnings—completely transforming the conventional passive standby model.”

International giants are also accelerating their digital transformation. Caterpillar, leveraging smart monitoring and predictive maintenance capabilities, has driven a substantial 59% increase in its stock price by 2025. A technology leader at Cummins stated: “Through digital twin technology, we’re optimizing our products’ environmental performance and efficiency parameters. Relying on regional digital service platforms, we can respond more swiftly to the personalized needs of customers in the Asian market, achieving a highly efficient synergy between technological optimization and localized adaptation.”

A relevant official from Mitsubishi Heavy Industries stated: “Leveraging digital simulation technology to deepen our expertise in large-bore engine technology, we can precisely target the high-power demand scenarios of ultra-large data centers and thereby increase our market share.”

Meanwhile, digital transformation is driving diesel generators to evolve from standalone devices into integrated system solutions. According to the Deutz technical team: “Our integrated ‘diesel-electric hybrid + energy storage’ solution, featuring intelligent collaborative control, enables real-time digital monitoring of load conditions and precisely adapts to the dynamic fluctuations in electricity demand from AI clusters, thereby maximizing power supply efficiency.”

Volvo Baida (Shanghai) Trading Co., Ltd., leveraging its digital collaboration advantages, offers a one-stop digital power solution for microgrid construction in data centers. As the company’s technical director noted: “The low fuel consumption and long maintenance cycle—optimized through digital algorithms—perfectly align with the cost and stability requirements of small- and medium-sized AI enterprises.”

Industry forecasts suggest that over the next three to five years, a hybrid architecture featuring “gas turbines as the primary power source, diesel generators as backup, and energy storage systems working in synergy” will become the mainstream choice for ultra-large-scale AI data centers. Gas turbines, with their rapid response—capable of cold-starting from zero to full load within 1 to 5 minutes—and a combined-cycle efficiency of 64%, will serve as the primary power supply. Energy storage systems will provide real-time buffering against fluctuations in computing demand, smoothing out peak loads and filling valleys, thereby reducing the pressure on switching between primary and backup power sources. Meanwhile, diesel generators, benefiting from a mature supply chain and low-cost advantages, will act as the ultimate backup solution for extreme scenarios such as interruptions in gas supply or depletion of energy storage capacity. Together, these three components form a closed-loop system characterized by “efficient power supply—dynamic regulation—reliable backup,” comprehensively ensuring the continuous delivery of AI computing power.

Diesel engines that complement new energy sources will see a growing market.

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Wind and photovoltaic power generation suffer from intermittent shortcomings—such as "extreme heat with no wind" and "peak demand in the evening with no sunlight." The rapid response and stable power supply capability of diesel generators perfectly complement these limitations, forming a hybrid power system together with renewable energy sources and energy storage systems.

From the perspective of energy security assurance, the value of diesel generators is becoming increasingly prominent. Faced with a volatile global energy security situation and continuously growing electricity demand, diesel generators serve as the core backup power source for ensuring basic power supply in island and remote areas. In integrated source-grid-load-storage parks and microgrid projects, diesel generators complement and work synergistically with new energy equipment, enabling more efficient tiered utilization of energy through deep integration with energy storage systems. Energy storage can smooth out load fluctuations during the start-up and shut-down of diesel generators, while diesel generators provide stable support for charging energy storage systems. Together, they form a power supply system characterized by "flexible adjustment plus reliable backup."

In terms of synergistic complementarity with new energy sources, the “primary-secondary coordination” model is becoming mainstream. Wind and photovoltaic power generation suffer from intermittent shortcomings—such as “extreme heat with no wind” and “peak evening hours with no sunlight.” The rapid response and stable power supply capability of diesel generators perfectly complement these limitations, forming a hybrid power system together with renewable energy sources and energy storage systems. A relevant official from Indonesia’s energy sector stated: “The regulations on hybrid power plants issued in 2025 explicitly allow diesel generator sets to be legally combined with solar, wind, and battery storage systems, prioritizing the use of clean energy while reserving diesel generators as backup to ensure power supply stability.”

The rapid development of distributed energy in China has also created vast opportunities for diesel generators. Industry experts point out: “As peak-shaving and backup power sources, diesel generators can reduce the reliance of energy consumption on the large-scale power grid and enhance the security of the energy system—making them particularly well-suited for remote data centers deployed under the ‘East Data, West Computing’ initiative.”

The low-carbon transition is an essential path for diesel generators to establish themselves in the new energy system. China has imposed stringent energy efficiency and environmental standards on generator sets, requiring existing units to undergo “three simultaneous upgrades” to reduce emissions and promote clean alternatives and the application of low-carbon technologies. Multi-fuel compatibility has emerged as a key breakthrough direction. According to the R&D director of a leading engine manufacturer: “The 19L multi-fuel engine scheduled for release in 2025 will be compatible with a variety of fuels—including diesel, natural gas, and hydrogen—reducing carbon emissions by more than 40% and better meeting the demands of a low-carbon energy system.”

Relevant technical personnel from Weichai also noted: “Our diesel engine technology, with a thermal efficiency of 53.09%, could reduce carbon emissions by 97 million tons annually, based on the current domestic fleet size, thus providing a technological pathway for the industry’s low-carbon transformation.” In the future, zero-carbon diesel generator technologies fueled by biodiesel and green hydrogen will accelerate their implementation, further enhancing their compatibility within a low-carbon energy system.

It’s not hard to foresee that, as the new energy system accelerates its development, diesel generators will by no means become “supporting characters” phased out by the times. On the contrary, thanks to their triple advantages—ensuring energy security, complementing and synergizing with new energy sources, and upgrading low-carbon technologies—they hold limitless potential for future development.

Looking at the Future of Industry Convergence Through the Comeback of Two Traditional Products

Under the AI wave, the resurgence of NVIDIA graphics cards and diesel generators is like a pair of cross-disciplinary mirrors, confirming a profound trend: the rapid advancement of the digital world will ultimately take root in the soil of the physical world.

Once upon a time, graphics cards were regarded merely as gaming hardware and nearly became marginal products as the PC industry’s growth slowed down. Meanwhile, diesel generators were labeled “high-energy-consuming” and were once thought to be gradually phased out in the transition to new energy sources. Yet today, thanks to the empowerment of AI, these two traditional products have been reborn, emerging as crucial links that bridge the digital and physical worlds.

NVIDIA’s comeback is nothing short of a classic tale. Thanks to the parallel computing advantages of its CUDA architecture, its graphics cards unexpectedly became the cornerstone of AI training compute power, transforming from gaming devices into the “powerful heart” of the digital world. When large models like ChatGPT demand massive data processing, NVIDIA GPUs—with their unparalleled computational prowess—break through bottlenecks and propel digital technologies to iterate at an unprecedented pace. Yet what’s little known is that the ultimate realization of this digital computing power hinges on the physical world’s infrastructure. AI-driven autonomous driving relies on onboard hardware to execute decisions; algorithmic optimization in smart factories depends on industrial equipment for actual production—and all of this, in turn, depends on stable power supply and robust physical hardware support.

The resurgence of diesel generators is equally significant. Against the backdrop of the “dual-carbon” goals and the development of a new energy system, diesel generators have not been replaced by new energy sources; rather, they have undergone a remarkable transformation through AI empowerment. Leveraging digital technologies, diesel generators have achieved upgrades such as predictive maintenance and multi-fuel compatibility, with thermal efficiency breaking through 53.09% and carbon emissions significantly reduced. From remote data centers under the “East Data, West Computing” initiative to hybrid power stations that address the intermittency of wind and solar energy, diesel generators play a crucial role as both an “emergency backstop” and a “cooperative complement,” ensuring energy security in the physical world. AI enables precise control of diesel generator operating parameters via digital commands, while diesel generators, in turn, provide the indispensable physical foundation for the continuous operation of the digital world.

The resurgence of these two products is, at its core, an inevitable outcome of the integration of the digital and physical worlds. They are more like a pair of gene sequences spiraling upward together, each complementing and enhancing the other. No matter how advanced digital technologies may be, they ultimately serve the production and daily life of the physical world and require tangible hardware as a platform for implementation. And no matter how traditional manufacturing may seem, it can still be revitalized through digital empowerment.

As industry experts have pointed out, the core of technological convergence lies in integrating digital technologies into the real economy, while physical convergence is the key to connecting the digital and physical worlds.

In the future, similar “revival” stories will unfold in even more fields. Digital technologies will continue to infuse smart genes into traditional products, while the rigid demands of the physical world will provide a vast stage for digital innovation. The deep integration of the digital and physical realms is reshaping industrial value and outlining a clear blueprint for future development. At the end of the digital world lies the boundless potential of the physical world—forever. And who will be next: traditional energy storage batteries or transformers? Of course, “the you of yesterday is no longer the you of today”—everything is changing. (Guo Yu)