Vestas, the world's largest wind turbine maker, is trying to remain on top of aggressive Chinese competitors by localising and customising its products for use in the region.
Although the Copenhagen-listed company has seen its world market share slide amid an explosive growth in the Chinese market, where domestic competitors take more than 75 per cent of orders for new capacity, Ditlev Engel, chief executive, insisted on Thursday that he would not compete on price.
"We offer the big utilities a product that will bring them the lowest price per kilowatt hour in the long term," Mr Engel said in an interview at Vestas' new plant in Inner Mongolia, the northern Chinese region at the heart of the country's wind energy boom.
China became the world's fourth-largest wind turbine market after more than doubling its total installed capacity last year to more than 12,000MW, growth that put it at more than three times the pace of the rest of the world, according to the China Wind Energy Association.
Most of that build-up is happening in Inner Mongolia: the grasslands of the far-flung, sparsely populated region, traditionally dotted with sheep and horses. It now houses turbines capable of producing 3735MW, or nearly one-third of China's total capacity.
Vestas' global market share stood at 27 per cent in 2007, down from well over 30 per cent a few years ago.
In China, Vestas accounted for 9.6 per cent of all new capacity last year, making it the country's largest foreign supplier.
But that contribution pales in comparison with local competitors. Sinovel, Goldwind and DEC, the three largest domestic turbine suppliers, accounted for close to 20 per cent each of the new capacity.
Driven by an ambitious government target of installing 30GW of wind power in the country by 2020, scores of other companies have stormed into the Chinese sector; more than 70 companies now offer wind turbines.
"Given that there are less than 10 serious players in the global market, consolidation must happen sooner or later - China needs seven at most," said Li Junfeng, deputy director of the Energy Research Institute at the National Development and Reform Commission, China's main economic policy maker. Moreover, China is severely lagging behind in linking up all the new turbines to the electricity grid, which could lead to overcapacity, especially in Inner Mongolia.
Vestas is trying to work around that. To compete with local rivals, the Danish company has localised 90 per cent of its supply chain.
Vestas also serves other markets in Asia from some of its Chinese plants, thus profiting from the lower component cost.
At its new plant in Hohhot, Vestas plans to make a smaller turbine with bigger blades, a machine tailored to the steady low to medium-strength winds that occur in Inner Mongolia. "This is the first time we have customised a product for any market," said Mr Engel.
The company also offers free transport of the 29m-long blades and massive turbine cell to the rugged locations, often without proper roads, where they are to be installed. "In Europe, wind towers can be built on arable, easily accessible land, but not in China," said Egon Hygom Poulsen, technology head of the team that developed the tailor-made turbine.
Vestas, which is scheduled to report first-quarter earnings on April 28, had a net profit of €511m ($674m) on revenues of €6bn last year.
Although the Copenhagen-listed company has seen its world market share slide amid an explosive growth in the Chinese market, where domestic competitors take more than 75 per cent of orders for new capacity, Ditlev Engel, chief executive, insisted on Thursday that he would not compete on price.
"We offer the big utilities a product that will bring them the lowest price per kilowatt hour in the long term," Mr Engel said in an interview at Vestas' new plant in Inner Mongolia, the northern Chinese region at the heart of the country's wind energy boom.
China became the world's fourth-largest wind turbine market after more than doubling its total installed capacity last year to more than 12,000MW, growth that put it at more than three times the pace of the rest of the world, according to the China Wind Energy Association.
Most of that build-up is happening in Inner Mongolia: the grasslands of the far-flung, sparsely populated region, traditionally dotted with sheep and horses. It now houses turbines capable of producing 3735MW, or nearly one-third of China's total capacity.
Vestas' global market share stood at 27 per cent in 2007, down from well over 30 per cent a few years ago.
In China, Vestas accounted for 9.6 per cent of all new capacity last year, making it the country's largest foreign supplier.
But that contribution pales in comparison with local competitors. Sinovel, Goldwind and DEC, the three largest domestic turbine suppliers, accounted for close to 20 per cent each of the new capacity.
Driven by an ambitious government target of installing 30GW of wind power in the country by 2020, scores of other companies have stormed into the Chinese sector; more than 70 companies now offer wind turbines.
"Given that there are less than 10 serious players in the global market, consolidation must happen sooner or later - China needs seven at most," said Li Junfeng, deputy director of the Energy Research Institute at the National Development and Reform Commission, China's main economic policy maker. Moreover, China is severely lagging behind in linking up all the new turbines to the electricity grid, which could lead to overcapacity, especially in Inner Mongolia.
Vestas is trying to work around that. To compete with local rivals, the Danish company has localised 90 per cent of its supply chain.
Vestas also serves other markets in Asia from some of its Chinese plants, thus profiting from the lower component cost.
At its new plant in Hohhot, Vestas plans to make a smaller turbine with bigger blades, a machine tailored to the steady low to medium-strength winds that occur in Inner Mongolia. "This is the first time we have customised a product for any market," said Mr Engel.
The company also offers free transport of the 29m-long blades and massive turbine cell to the rugged locations, often without proper roads, where they are to be installed. "In Europe, wind towers can be built on arable, easily accessible land, but not in China," said Egon Hygom Poulsen, technology head of the team that developed the tailor-made turbine.
Vestas, which is scheduled to report first-quarter earnings on April 28, had a net profit of €511m ($674m) on revenues of €6bn last year.
Source: The Financial Times
No comments:
Post a Comment