context: Many strategic industries in the PRC are dealing with involution—a destructive race to the bottom—an issue acknowledged by the Politburo in July. Just two days after the wind energy association convened its sector to establish competition guidelines, the photovoltaic industry association followed suit, a few days after it held discussions with industry leaders to address this growing concern and explore ways to promote healthier competition within the sector.
CIPA (China Photovoltaic Industry Association) noted on 18 October that bids below cost violate the Tendering and Bidding Law and should be rejected, reports Caixin.
The association contended that prices for PV (photovoltaic) products have fallen below production costs, dragging the entire industry into a vicious cycle of unhealthy competition and involution. CIPA noted that the lowest sustainable production cost, ensuring product quality, is RMB 0.68 per watt. CPIA plans to closely monitor bidding practices and address any violations through regulatory and legal avenues.
The association clarified that their cost estimates exclude depreciation and full costs (e.g., sales and management expenses), meaning actual costs are higher than stated. To ensure long-term sustainability, CPIA argued that product prices must exceed full production costs. Although some manufacturers maintain slim margins, their profitability relies on significant losses in key raw materials, which is unsustainable.
CPIA also urged tendering parties to respect market rules by setting reasonable price limits and focusing more on service and quality in bid evaluations. The association remains hopeful for industry recovery, predicting capacity reductions by early 2025, though the downturn could last until the end of that year.
Industry consultant PV InfoLink expressed scepticism about the effectiveness of CPIA’s efforts to prevent destructive competition, pointing out weak demand in major markets. The consultancy warns that without strong market demand and unified industry cooperation, CPIA’s call for self-regulation might face challenges.
The article notes that in H1 2024 many leading companies reported losses
- Longi Green Energy lost C¥5.2 bn
- Tongwei lost C¥3.1 bn
- TCL Zhonghuan lost C¥3 bn
- JA Solar Technology lost C¥870 million