The future appeared bright for solar energy (PV) and electric vehicles (EV) over the past few years. However, unexpected market developments have triggered concerns among supply chains about the likelihood of government policy changes, potentially becoming a pivotal factor influencing industry trends in 2024 and beyond.
Take the United States' solar energy sector, for example. The most significant impact on system manufacturers is expected in mid-2024 when the US tariff exemptions on solar panels from Southeast Asia expire, including Cambodia, Malaysia, Thailand, and Vietnam. By then, the cost for US manufacturers purchasing products from these regions is anticipated to increase significantly. However, domestic production capacity in the US has not yet caught up.
In April 2023, the US House of Representatives voted against the two-year exemption proposed by President Biden, hoping to extend the exemption period. Even though the Senate further approved the bill in May, it was ultimately vetoed by Biden.
Supply chain experts note that by the end of 2024, the US will witness presidential, vice-presidential, House, and Senate elections. This adds variables to solar energy policies, as elections are opportunities for lobbying by interest groups. The acquisition of modules becomes crucial for the survival and employment of US solar panel manufacturers.
European governments, the US, and established car manufacturers recognize that consumers' EV enthusiasm loses its spark without favorable incentives, price discounts, and substantial government subsidies.
Especially in Europe, softer demand in the second half of 2023 due to reduced and canceled subsidies. Internal combustion engine (ICE) vehicles quickly compensated for this impact, confounding the critics.
Moreover, with the European government's budget already stretched, questions arise about whether they will continue to increase subsidies to accelerate the transition from public transportation to EVs. This decision becomes critical as the installation speed of charging stations lags far behind the growth of EVs, considered a key factor affecting the widespread adoption of electric cars.
In their pursuit of fair competition, Europe, in addition to conducting investigations into anti-subsidy practices for Chinese EVs, has been rumored to restart anti-dumping and countervailing duties investigations into Chinese solar energy.
Industry insiders suggest that Europe's potential concerns about China are not unfounded. After imposing anti-dumping tariffs on Chinese solar panels, the wave of closures of domestic production did not cease until the compromise in 2018. China's imports were reopened to boost the share of renewable energy in power generation. Due to the current energy crisis, Europe wants to regain self-sufficiency, but the space for survival is not only crowded but possibly minimal.
European businesses have expressed concerns that Chinese exports could inundate its automotive industry, much like they did previously in its solar panel sector. With China's EV overcapacity flooding the global market, European businesses fear the onset of a domestic price war. As China's auto groups impact Korean and Japanese automakers significantly, they may increase their presence in Europe as European legacy brands experience declining market shares in China, adding pressure from internal and external market competition.
Industry experts note that the strikes by American workers, driven not only by inflation and livelihood concerns but also by anxieties about the transformation toward vehicle electrification and automation (VEA), have resulted in compromises. American automakers have increased costs by raising wages, making it a challenge to compete with Japanese and Korean counterparts in 2024.
China, holding an 85% global market share in solar energy, is often the focal point of contention between Washington and Beijing. The US government considers factors such as public opinion and maximizing interests when deciding strategies, but attack and defense strategies also attract some public support.
Therefore, the market believes that the probability of policy shifts by European and US governments in 2024 is high. The most crucial factor remains geopolitical tensions, concerns about warfare, inflation, the economy, and employment, prompting a departure from the operational inertia of past practices.
The market is changing at speed amidst geopolitical tensions and a slowing economy. China's subsidy-driven EV boom has resulted in the ongoing issue of projects being abandoned midway, leading to another wave of capital waste. In addition, the EV sector is grappling with challenges such as overcapacity, shutdowns, layoffs, and closures, facing an uncertain outlook.
