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as the price war continues, how long will the wind power industry be “involuted”?

according to statistics from the china wind energy association (cwea), the bidding capacity of new wind power projects in my country in the first half of the year was 73.461 million kilowatts, of which new bidding for onshore wind power reached 67.897 million kilowatts, a significant increase compared with 2023, and the complete machine companies have sufficient orders on hand.

the reporter of daily economic news noticed that after august, most a-share companies have disclosed their semi-annual reports. specifically for listed companies in the wind power industry, although the price of wind turbines has rebounded in the first half of this year, the "price war" is still going on. under the long-term competitive situation, the changes in gross profit margins of different wind power companies show differences.

gross profit margin of wind turbine products has rebounded

according to statistics from the national energy administration, in the first half of 2024, the country's new installed capacity of renewable energy power generation was 134 million kilowatts, a year-on-year increase of 24%, accounting for 88% of the country's new installed power capacity. by the end of june 2024, the country's installed capacity of renewable energy power generation reached 1.653 billion kilowatts, a year-on-year increase of 25%, accounting for about 53.8% of my country's total installed power generation capacity, of which wind power installed capacity was 467 million kilowatts, and the total installed capacity of wind power and photovoltaic power generation (1.18 billion kilowatts) has exceeded coal-fired power installed capacity (1.17 billion kilowatts).

in the first half of 2024, the national wind power grid-connected capacity increased by 25.84 million kilowatts, a year-on-year increase of 12%, including 25.01 million kilowatts of onshore wind power and 830,000 kilowatts of offshore wind power. by the end of june 2024, the national wind power grid-connected capacity reached 467 million kilowatts, a year-on-year increase of 20%, including 429 million kilowatts of onshore wind power and 38.17 million kilowatts of offshore wind power. in the first half of 2024, the national wind power generation was 508.8 billion kilowatt-hours, a year-on-year increase of 10%, and the national average utilization rate of wind power was 96.1%.

august has passed, and equipment manufacturers such as goldwind science & technology (002202.sz), windpower holdings (300772.sz), mingyang smart energy (601615.sh), sany heavy industry (688349.sh), dongfang electric (600875.sh), china electric wind power (688660.sh), china shipbuilding technology (600072.sh), and taiyuan heavy industry (600169.sh) have all released their 2024 semi-annual reports.

the market competition situation of survival of the fittest among system integrators has intensified, the technological iteration of industry units has accelerated, and the market demand for large-megawatt units has put forward higher requirements for r&d, model planning, quality, etc., further increasing the risk of market competition.

among the above-mentioned companies, three disclosed the financial data of the company's specific products.

in the first half of 2024, goldwind technology's wind turbine and parts sales achieved operating income of 12.768 billion yuan, a year-on-year increase of 0.21%, and a gross profit margin of 3.75%, an increase of 0.11 percentage points from the same period last year. windpower's wind turbine products achieved operating income of 6.482 billion yuan, a year-on-year increase of 2.09%, and a gross profit margin of 10.34%, a decrease of 5.52 percentage points from the same period last year. cssc's wind turbine generator and accessories products achieved revenue of 884 million yuan, a year-on-year decrease of 72.16%, and a gross profit margin of 6.27%, a year-on-year decrease.

sany heavy energy's semi-annual report also mentioned that in the first half of 2024, the company's wind turbine business gross profit margin was 15.13%, an increase of 6.14 percentage points from the second half of last year, and has improved for two consecutive quarters in the first half of the year.

why is the company's gross profit margin declining as the industry recovers? on september 9, a reporter from the daily economic news called yunda shares, and the company staff said they didn't know. the reason for the company's declining gross profit margin, from an accounting perspective, may be that the increase in the cost of its main business exceeded the increase in its operating income.

how were the company's wind turbine products and prices in the first half of this year? the other party said that this information was not within the scope of disclosure.

the industry is facing a "prisoner's dilemma"

with the implementation of the national subsidy cancellation policy, domestic wind power has achieved grid parity, the industry's competition is fierce, and the bidding prices of wind turbines have continued to decline.

however, the downstream prices have fallen, but the upstream raw material prices have not fallen synchronously. dongfang electric said that the current prices of bulk raw materials and key materials have risen, product costs have risen, and at the same time, affected by more intense market competition, the prices of wind power equipment and other products are still low, and the gross profit margin is low, which may affect the company's overall profitability.

according to a research report by guojin securities, based on the quarterly profit trend changes in the upstream raw materials and parts segments last year, it is estimated that the gross profit margin recovery in the first half of the year was mainly contributed by the transmission of price pressure to the upstream, but there were also factors such as the large-scale wind turbines and the increase in overseas share. considering that the bidding prices of wind turbines in the first half of the year were basically stable and the purchase prices of parts were relatively low, it is expected that the profit recovery of the whole machine in the second half of the year will be sustainable.

a staff member of cssc told the reporter of daily economic news that although the wind turbine manufacturing industry is recovering, the industry is still in a state of internal competition, and called on peers not to continue this competitive situation. due to the limited market and resources, industry companies are forced to fully compete. with the saturation of onshore resource development, everyone is gradually "opening up" to offshore resources and overseas markets, but due to the influence of geopolitics and international situation, the future direction is still unpredictable.

"all companies have realized this (referring to internal circulation) problem, but in the actual operation process, in order to survive, the company has to adopt some low-price strategies. to some extent, it is a bit like the prisoner's dilemma. it depends on who can hold on longer." said the above staff member.

in the first half of 2024, the revenue of wind turbine generator sets and accessories of cssc technology decreased by 72.16% year-on-year. the company's semi-annual report shows that due to the intensified competition in the wind turbine manufacturing market in the wind power industry, the winning bid price of wind turbine sets is in a fluctuating downward trend, and the profit margin is further compressed. in order to ensure the quality of orders, the company actively avoids orders with poor quality or small profit margins, focusing on strategic customers and key customers to further improve the quality of the company's orders.

(cover image source: photo taken by reporter zhang jian of meijing)

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