Whalesbook
China's Solar Subsidy Shift Sparks Opportunity for India
China announced on January 9th that it will eliminate rebates for photovoltaic products and reduce those for batteries, a move set to take effect on April 1, 2026, and phase out entirely by early 2027. This significant policy change aims to address profitability concerns and enhance domestic self-sufficiency. Given China's dominant 80% share in the global solar panel value chain, the removal of subsidies will likely drive up international prices, creating a favorable environment for Indian solar exporters who have long competed against subsidized Chinese goods.
Module Makers Poised for Growth
Indian solar module manufacturers such as Waaree and Premier Energies are positioned to benefit. Waaree boasts substantial cell and module manufacturing capacities, with exports already forming a significant portion of its revenue. Premier Energies, while currently more domestically focused, has considerable room to expand its export business. The removal of China's 9-13% rebate will help level the playing field, making Indian products more competitive globally. Both companies have demonstrated healthy EBITDA margins and possess negative net debt, enabling further expansion. Waaree's revenue has grown rapidly, and Premier has the potential to accelerate its growth as global prices rise.
Solar Glass and Chemicals Face Shifting Dynamics
Borosil Renewables, a key player in India's solar glass manufacturing, is also set to gain as expensive Chinese imports become less of a factor. The company has seen improved profitability and a moderated debt-to-equity ratio. However, domestic competition could intensify as other firms like Asahi India Glass may increase their focus on solar glass. In the chemical sector, companies like Neogen Chemicals, Himadri Speciality Chemical, and Gujarat Fluorochemicals, which produce essential materials for solar cells and batteries, are well-positioned. Neogen's joint venture for lithium hexafluorophosphate manufacturing is timely, while Himadri and Gujarat Fluorochemicals are also expanding capacities in advanced battery materials. Despite strong past stock performance reflecting existing optimism, tangible benefits from China's policy shift could still materialize.
Risks and Broader Impact
While the rebate removal is positive for module makers, the cost of building solar plants will increase globally. Companies focused solely on power plant construction, like NTPC, might face higher expenses. Furthermore, the gap in solar cell manufacturing cost between India and China remains substantial, even with the rebate removal, as India's production is up to twice as expensive. This suggests a long road ahead for India to match China's scale and price efficiency in solar cell production. The scenario offers lessons from China's past subsidy removals on metals, which triggered significant price rallies, but the solar value chain presents more complex dynamics.