Over the past few years, China has become the main driver of the solar industry. Much of it has to do with the fact that solar panels manufactured in this country are already 60% cheaper than those produced in Europe or the United States. While China has become the world’s leading exporter of solar panels, we are facing a serious demand crisis affecting the industry.
Solar panel prices in China are unbeatable right now. The main reason for this is a loss-making sales strategy that Chinese companies have been maintaining for years to consolidate their position in the sector. And despite the tariffs imposed by the United States and other allied countries, Exports in the photovoltaic sector continue to increaseThey have already risen by 10% compared to last year and wholesale prices continue to fall: by half in 2023 and by almost 25% in 2024.
More exports, but a worsening oversupply crisis
That exports are at an all-time high does not mean that the solar industry in China is going through a good moment. And as pointed out by the New York Times, There is a lot of competition in the countryan excess of manufacturers that has meant that there are not enough facilities in the country to cover the supply.
For these and other reasons, it is normal to see colossal projects emerging in the country to satisfy this excess supply, such as its gigantic building-parking lot to charge electric cars or the largest solar farm in the world located in the Xinjiang region.
A few days ago we talked about several of the large companies in the sector that have announced significant losses in their fiscal year for this year. Many of them They sell their panels at a price below costwhich has led to the stock market value of some of these companies plummeting. However, the purchasing power of these types of companies has meant that they can remain in this state for a long time.
The Chinese government has been one of the main drivers of this oversupply. Thanks to generous loans from banks and local subsidies, China has ended up becoming the a country with overproduction in the photovoltaic industry. The business is not being wasted (far from it), as China is close to meeting its emissions targets this year, when the date was originally planned for 2030.
Total solar power capacity in China It already exceeds almost double the global demand. Furthermore, the problems are compounded by the fact that local governments are running out of funds to cover subsidies. unprecedented real estate crisis has been the main cause, which makes it difficult to sell long-term leases, which until now was the main source of income for local governments.
In addition, the Ministry of Industry and Information Technology has issued a draft regulation that reduces the money that is lent to companies to expand their factories, from 80% of the total required to 70%. Despite this, many companies claim that Layoffs are the only way to deal with this crisis if the business is to continue to expand as it has been doing so far. Hopes are now pinned on the rise of artificial intelligence and electric vehicles.
Cover image | Zbynek Burival
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