Double hit for Chinese OEMs as market shrinks amid falling turbine prices

Chinese turbine manufacturers are looking to diversify their business in response to falling onshore growth rates and subsidies being phased out in the world's leading wind market, new research shows.

Goldwind is one of the few Chinese OEMs with a presence outside Asia, supplying 4.2MW turbines to the Golden South Wind project in Canada
Goldwind is one of the few Chinese OEMs with a presence outside Asia, supplying 4.2MW turbines to the Golden South Wind project in Canada

Annual onshore wind capacity additions in China are expected to drop by more than 16% to 19GW from 2020 to 2021as a result of the government’s decision to end subsidies, according to analysts Wood Mackenzie.

At the same time, turbine prices are expected to drop by 27% over the next five years, cutting manufacturers’ gross profit margins by half, the researchers claim.

China had originally planned to axe wind subsidies for both onshore and offshore wind starting this year, but is considering extending the cut-off date following pleas from businesses worried that the Covid-19 pandemic would delay their ability to connect to the grid in time.

To deal with expected subsidy cuts, the biggest Chinese turbine makers are adopting new strategies to stay competitive, said Wood Mackenzie consultant Kevin Han. These include the development of bigger and more efficient turbines, taking control of procurement costs and diversifying into non-wind businesses.

China’s three largest OEMs, Goldwind, Envision and Ming Yang will increase their onshore market share from 63.5% in 2020 to 69% in 2029, Han predicts. 

While Goldwind and Envision have launched 3MW platforms with rotor diameters of 150 to 156 metres Ming Yang has focused on high-wind platforms, including the MySE 4.X-156 and MySE 5.X-166. Mainstream turbine models are transitioning from the 2.5-3.0MW segment to 3-5MW range after 2021, Han added.

But to protect revenues, leading Chinese turbine OEMs have ultimately started to diversify into non-wind businesses. Goldwind’s water treatment and financing lease businesses realised a net profit margin of 12.6% and 41.3% respectively in 2019, while Envision has accelerated its electric vehicle battery and storage business by acquiring Automotive Energy Supply Corporation.

Meanwhile, Ming Yang’s solar and financing lease business is expected to support the company’s long-term growth, generating revenue of more than CNY 290 million ($41 million) in 2019.

Despite supply chain constraints and delays caused by the coronavirus, developers are expected to connect 26GW of wind power to China’s grid this year. Over the next decade, Wood Mackenzie expects 250GW of wind power capacity to be brought online in China, with growth in the offshore sector and wind repowering opportunities bolstering onshore development. 

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