REFILE-Wind turbine battleground shifts for European and Chinese rivals

July 22, 2013 by  
Filed under Green Energy News


Mon Jul 22, 2013 11:32am EDT

* Targeting emerging markets and North America

* Chinese wind turbines about a third cheaper

* Western players offer better quality and maintenance

By Christoph Steitz and Mette Fraende

FRANKFURT/COPENHAGEN, July 22 (Reuters) – European and
Chinese wind turbine makers are poised to do battle away from
their domestic markets as the focus in the 60 billion euro ($79
billion) industry shifts to North America, Brazil and India.

Hit by overcapacity and plunging prices in Europe and
China’s saturated markets, manufacturers of wind turbines are
under pressure to find new areas of growth to boost single-digit
profit margins.

Clashes between the two factions have been limited so far.
Chinese companies were busy with a boom in a home market that is
resistant to overseas interlopers, while European companies
cemented a position of strength in their markets.

Long-established quality and brand recognition has also
enabled the Europeans to establish a respectable foothold in
foreign markets, including the United States, where General
Electric will fight hard to defend its leadership.

However, a 26-percent decline in new turbine installations
in China last year – triggered by overcapacity, lack of finance
and grid connection issues – has upped the ante for Chinese
businesses to improve quality and services to take on European
rivals abroad.

“I expect to see the big Chinese players gain market share
in international markets over time,” said Steen Broust Nielsen,
partner at Denmark-based MAKE Consulting.

The concern about competition from the east is partly based
on developments in the solar sector in recent years, where
Chinese players edged out many European peers in the global
market for solar panels.

Frankfurt-based Union Investment fund manager Thomas Deser
played down the parallels, pointing out that turbines require
far greater engineering expertise than solar panels because of
their size and the external forces to which they are exposed.

“Wind turbines are no commodity,” he said.

The global wind turbine market is largely controlled by
western manufacturers. MAKE Consulting says that U.S. group
General Electric, Denmark’s Vestas, Spain’s Gamesa
and Germany’s Siemens and Enercon held a
combined 55 percent in 2012.

For now, the four Chinese companies among the top 10 -
Goldwind, United Power, Sinovel
and Ming Yang – share only 16 percent.

PRICE VERSUS QUALITY

Chinese companies benefit from extensive economies of scale
that allow them to price their turbines about a third cheaper
than European equivalents. But inferior maintenance services and
problems with fan blades, including instability and shorter
lifespans, still separate them from their western peers.

“The Chinese are lacking the required service network,” a
spokesman for German wind turbine maker Nordex said,
adding that some Nordex turbines include a unique anti-icing
system that heats up parts of the blades when temperatures fall.

Industry analysts and executives agree that it is unlikely
that the Chinese will attack their western peers in Europe,
given the high shipping costs and the Europeans’ superior
maintenance services.

The big contest is more likely to occur in North America and
emerging markets.

HSBC estimates that Canada, Brazil, Mexico and India will
account for more than 18 percent of the global market by 2015,
compared with 11.5 percent last year.

The U.S., meanwhile, could account for 17.4 percent of the
global market in 2014, up from an expected 6 percent this year,
after extending a tax credit break in January.

Some Chinese players have already made a move. Ming Yang,
for instance, acquired a 50 percent stake in India’s Global Wind
Power last year for $20 million to enter the Indian market and
said it aims to expand further in major overseas markets.

Goldwind, China’s top wind turbine manufacturer by sales,
has said that fierce domestic competition is forcing it to push
into international markets including Africa, South America,
Australia and the United States. International markets accounted
for 11.6 percent of Goldwind’s sales last year, up from 9.5
percent in 2011.

Western players, however, continue to rely on their superior
quality when it comes to new markets.

“You have to demonstrate the quality of your product,” said
Keith Longtin, general manager of wind products at General
Electric. “I don’t think, just because you’re going to Brazil,
customers are not going to want that.”

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