Chinese Industry: PV CV Leads the Way for Electric Vehicles

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China has captured a dominant chunk of market share in many industries. The latest is that of batteries for electric cars, a sector still in its infancy. To see where that might end up, consider solar cells. Here China has an unassailable advantage and dominates the entire supply chain.

Chinese manufacturers have achieved economies of scale thanks to a thriving captive domestic market. Installed solar capacity has increased by nearly two-thirds to a record 87 gigawatts in 2022.

The biggest solar panel manufacturers it cut prices by about a third at the end of last year. In the first four months of this year, installed capacity almost tripled year on year. Exports more than doubled in 2022 despite reports of forced labour.

In the mid-2000s, Europe had a chance to capture a dominant share. Germany alone has claimed a fifth of global solar cell production, overtaking China. Over the past five years, China has captured more than 80% of the market.

There is a telltale disconnect between the go-go production statistics and the underperformance of Chinese solar cell manufacturers. Longi Green Energy Technology, JA Solar Technology and Trina Solar have all declined by more than a fifth in the past year. Longi, the largest company, is trading at 13 times forward earnings, about half the valuation of smaller US peers.

These companies have chased sales at the expense of profitability. Plant growth is likely to far outpace energy demand and storage capacity.

President Xi Jinping is serious about getting China on course to net zero by 2060. The government provides generous subsidies to industries critical to the energy transition.

Cars are less of a commodity than solar cells. Even so, the effectiveness of China’s solar cell policy should give chills to Western EV companies, especially battery specialists. A large domestic market, low labor costs and tolerance for low margins add up to a formidable price advantage for EV manufacturers and PV specialists.

Lex’s team is interested in hearing more from readers. Please tell us what you think about Chinese dominance in solar cell manufacturing in the comment section below