Visual China.
In the past two years, "going to sea" has become a must for China's photovoltaic enterprises, and the "100 regiment war" in the domestic market has led to the extreme squeezing of profit margins.
Taking Sungrow's energy storage business as an example, its revenue in the first three quarters of 2023 was 13.7 billion yuan, a year-on-year increase of 177%, and 80% of its revenue came from overseas markets. This is in stark contrast to the more than 120,000 energy storage companies in China that are still involuting. Seeing the excellent performance of overseas enterprises, photovoltaic enterprises have started a journey of "majestic, high-spirited, and across the sea and ocean", which also represents the "volume" of photovoltaic enterprises from domestic to foreign.
The European and American markets are the largest overseas renewable energy demand markets, so at the beginning, China's photovoltaic enterprises chose to build factories in the places of cooperation and demand. During this period, the local environment was relatively friendly, such as the Inflation Reduction Act (IRA) in the United States, which gave a large amount of subsidies to enterprises in all links of the photovoltaic industry chain, and welcomed Chinese photovoltaic companies to invest in the construction of factories. Affected by the conflict between Russia and Ukraine, the price of natural gas in Europe has skyrocketed, and in order to get rid of the dependence on traditional energy, Europe has begun to accelerate the transformation of clean energy, increase the import of photovoltaic modules, and promote the construction of factories by foreign companies. While reducing transportation costs, overseas factories also greatly increase the stickiness of cooperation with local communities.
However, the "honeymoon period" is short-lived, and the European and American markets have been putting pressure on Chinese companies recently. Recently, the European Photovoltaic Industry Association said that less than 2% of solar energy is currently produced in Europe, and many local European companies have also been affected and closed, such as Solarwatt, Valoe, etc. In response, John Lindahl, secretary general of the European Solar Manufacturing Council, said: "There is a serious overcapacity in the world, and European manufacturers are suffering huge losses. We need to deal with the Chinese threat." It is not difficult to see that in the future, in order to protect local enterprises, Europe will inevitably carry out some measures to pressure Chinese enterprises.
In the United States, according to relevant policies, the United States will achieve 100% local photovoltaic manufacturing by 2026. The return of manufacturing is still the fundamental demand of the United States, although some time ago it was more favorable to China's photovoltaic enterprises, but the recent policy pressure has shown that the United States has begun to act on China's photovoltaic enterprises. Both Chinese-made and Southeast Asian-made products are being re-stuck, and tariffs are gradually being raised when exporting to the United States.
Overall, at this stage, the "honeymoon period" between China's photovoltaic enterprises and the European and American markets is cold, but because the current local production capacity in Europe and the United States is still unable to meet the market demand, the European and American markets still have huge room for development in the short term. While Europe and the United States protect local enterprises and suppress China's photovoltaic enterprises, they still need the production capacity of China's photovoltaic enterprises, so in the short term, China's photovoltaic enterprises are very likely to face a situation of "pain and happiness". It is worth noting that the long-term goal of Europe and the United States is still to completely localize the industrial chain, and the suppression of China's photovoltaic enterprises will become more and more serious under this goal.
Southeast Asia, which can be attacked and defended, has become a "battleground" for domestic photovoltaic enterprises. At present, a number of leading PV companies have successively built factories in Southeast Asia, such as LONGi, Trina Solar, JA Solar and JinkoSolar, which are engaged in PV module production. Foster, Jinjing Technology, Kibing Group, Haiyou New Materials, etc., which are building photovoltaic auxiliary materials.
Southeast Asia has become a "must fight" for China's photovoltaic enterprises, mainly because it can "attack" the European and American markets and the Southeast Asian market. Although the United States supported China's photovoltaic enterprises to build factories in their home countries some time ago, it has always been a suppressive attitude towards products manufactured in China, which is reflected in the increase in tariffs on the import and export of China's photovoltaic products. In addition, Europe has recently considered increasing tariffs on photovoltaic products made in China in the name of anti-dumping. The cost of tariffs on photovoltaic products produced in Southeast Asia is relatively low when exported to Europe and the United States, but the bad news is that in order to suppress China's photovoltaic enterprises recently, the United States has also increased tariffs on photovoltaic products produced in Southeast Asia.
In addition, in order to carry out its own industrial upgrading and energy transformation, Southeast Asia has a growing demand for photovoltaic products. According to Rystad Energy, Southeast Asia will invest more than $76 billion in renewable energy by 2025, and the National Renewable Energy Laboratory (NREL) also says that Southeast Asia's installed renewable energy capacity will reach 35% by 2025. Although the overall market capacity is still less than that of the European and American markets, it also has a large market space.
In terms of "retreat and defense", China's photovoltaic enterprises can increase their advantages by reducing costs under the trend of increasingly fierce competition. At this stage, with the continuous tightening of financial policies, it is increasingly difficult for photovoltaic companies to obtain financing in China, and the financing cost at the market end is relatively high. In contrast, due to the need for industrial upgrading, Southeast Asia has greater support for the photovoltaic industry, providing a certain space for foreign enterprises to build local factories. The second largest cost is production cost, and compared with China, Southeast Asia has lower land costs and labor advantages. Photovoltaic enterprises going overseas to Southeast Asia is conducive to reducing the production cost of enterprises.
On the whole, China's photovoltaic enterprises can attack overseas markets in Southeast Asia and defend their own cost advantages, so Southeast Asia has become a "must fight" for China's photovoltaic enterprises.
However, this does not mean that you can sit back and relax by squeezing into Southeast Asia, and for domestic photovoltaic companies, they still face the following risks. The first is that the tariff advantage will gradually shrink, as mentioned earlier, the United States has recently begun to increase tariffs on photovoltaic products manufactured in Southeast Asia. Secondly, the cost advantage will gradually decrease in the long run, which is mainly reflected in labor costs and land. Finally, there is the competitive factor, at this stage, it is a foregone conclusion that the photovoltaic will be "rolled" from the domestic to the foreign countries, and with the addition of more domestic enterprises, the Southeast Asian market will become more and more crowded. (This article was first published in Ti **app, written by Gu Shuo, edited by Liu Yangxue).
For more macro research dry goods, please pay attention to the titanium **International Think Tank***