Sinovel faces big struggle - analyst

Chinese wind turbine manufacturer Sinovel faces a struggle to reinvent itself in order to survive after a disastrous two years that has seen it suffer poor financial results, face fraud and espionage allegations, and lose market share in China, says analyst IHS-EER.

“The vendor’s lack of proprietary technology assets, questionable product performance and stretched delivery capabilities have proven insufficient to support its aggressive expansion strategy,” says IHS-EER senior analyst Jing Wang in a note.

IHS-EER identifies a number of key weaknesses in Sinovel’s offering compared to its peers, including a lack of presence in the areas of project development and wind farm asset ownership, which it says limits Sinovel’s ability to match the needs of big power generation companies like Datang and Huaneng.

The analyst also claims that Sinovel’s technology credibility remains “questionable” despite holding an early advantage, something that has been highlighted by the ongoing dispute with former key supplier and technology partner AMSC.

The AMSC lawsuit “illustrates a supplier lacking internal research and development capabilities or a technology purchasing strategy to improve on its main product platform,” says Wang, who also notes worker fatalities involving Sinovel turbines.

The AMSC dispute and market developments have also prevented Sinovel from converting its international supply agreements into project execution and revenues.

Sinovel also needs to prove the quality of its low- and medium-wind speed turbines to sustain a “relevant” market share in China.

The company has responded to recent setbacks by downsizing and reducing its international presence - closing most of its foreign subsidiaries.

It is focusing on its services business and product quality, and has established a dedicated arm for EPC and O&M services. Sinovel is also likely to concentrate on its offshore business, where it has the largest amount of installed capacity in China and the longest track record.

However, whether the strategy changes will deliver results depends on Sinovel’s ability to “execute in a significantly different competitive environment,” Wang says. 

“Sinovel now falls into a category of large, but technically challenged players, and the company must reinvent its internal culture to focus on technical quality, rather then scale,” she adds.