Import Cost Advantage Drives Solar Cell Sales

Entrenched North American and European market leaders usually have brand, channel and sales force advantages over lower priced, Asian imports.  What price differentials overcome these go-to-market advantages? Of course it will vary by industry but 20% to 30% certainly seems to do it.

In the market for solar cells, Chinese manufacturer JA Solar is rapidly taking market share due to its cost and price advantage. According to their CEO, “Several European solar manufacturers have a strong brand, sales channel and access to end market, but do not have the right cost structure, and they cannot compete effectively in the new market and pricing environment.”

JA Solar is competing on roughly 20% margins. Its competitors appear to require 33% or more. That gives JA Solar at least a 19% price advantage if their cost of goods sold were identical and we believe JA Solar’s costs are lower. Clearly in this case, a 20% to 30% price advantage appears to swings business to the low price supplier even without the advantages of sales force, brand and channel.