Solar panel manufacturers in China are experiencing a bloody price war that is leading them to exhaustion. The situation is so delicate that the most important firms in the industry have held meetings to form a cartel similar to that of OPECaimed at establishing an optimal price that can guarantee competitive prices for the sector, as well as the survival of a large part of the companies. However, some companies believe they can be saved individually, contributing to increased uncertainty among producers and members of Xi Jinping’s government.
At the annual meeting held in early December by the CPIA (China Photovoltaic Industry Association), 33 important manufacturers of photovoltaic panels They committed to establishing a common discipline in prices, emulating the cartel that OPEC exercises over oil. In this sense, the producers agreed to production quotas based on their capacity, agreeing to strictly follow a minimum price previously established by the CPIA, located at 0.68 yuan (0.09 dollars) per watt.
But problems came two weeks later. A subsidiary of China Energy Investment Group set a maximum bid for a project in Xinjiang that was below the minimum price stipulated by the CPIA. “Are you trying to stop the fierce competition in the industry, or increase it?” the association asked sarcastically in a subsequent statement.
This fact illustrates very well the state of the Chinese solar panel industry. The problems began in 2021, when Xi Jinping announced the goal of zero emissions by 2060establishing objectives of 1,200 gigawatts of wind and solar production by the end of 2030. That was a real bugle call for renewable energy firms, which rushed to go to Chinese territory.
Beijing’s plan was going from strength to strength. Between 2011 and 2022, the Asian giant invested more than $50 billion in solar energy supply, which allowed Chinese firms increase your global market share up to 80%. A monstrosity that has translated into an annual energy production of 1,200 GW in solar panels, a volume that doubles last year’s global demand and exceeds the demand forecast for 2030.
As a result, costs collapsed, forcing companies to reduce prices, selling their products at a loss. In this sense, solar panel supply chain prices they fell between 60% and 80% in 2024. In fact, last year 39 of the 121 companies registered with the CPIA recorded losses. Even Longi Green Energy Technology, one of the large Chinese producers, was forced to lay off 5% of its workforce.
This being the case, the danger is that the price war will continue, undermining the quality of Chinese photovoltaic panels, also reducing the competitiveness of producers globally. However, despite this situation, the price of Chinese solar panels continues to be almost 50% cheaper than that of its European rivals, for example. That is to say, the sector has room to maintain its dominance.
On the other hand, the price war in the photovoltaic sector is a situation that other sectors of the Chinese economy have already experienced. The latest to join has been electric cars, which is undergoing a similar consolidation process. He Xiaopeng, CEO of the Xpeng automobile company, assured in an internal letter that competition between manufacturers in 2025 “will be fiercer than ever“In addition, the businessman pointed out that “the period between 2025 and 2025 marks the eliminatory rounds of the automobile industry.”
That is to say, at first glance, the situation in the photovoltaic sector responds to a usual strategy of Beijing. In it, the first step is to massively boost production in a certain sector, and the second is leave a ‘Darwinian’ fight in which the strongest company wins. The idea is that the victorious company emerges from this combat as a very important firm on a global level, just as is happening with the automotive company BYD.
However, fear has reached the halls of Zhongnanhai, the official headquarters of the Chinese government. For this reason, Beijing has already applied some measures to reduce excess production in the sector, such as reducing electricity consumption for polysilicon producersmaterial used for the manufacture of photovoltaic panels. This would allow production capacity to be reduced by between 20 and 30%, according to Ken Lio, an analyst at UBS. For her part, Jesica Jin, an analyst at S&P Global, points to another problem that may hinder Xi Jinping’s plans. The expert points out that there are so many photovoltaic panel factories in Chinese territory that it is very difficult to establish effective surveillance to ensure compliance with government measures.
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