**Huarui Caught in the "Redundancy" Storm**
After experiencing a "double reversal" between the United States and Europe, the wind power industry has also entered a period of "winter." As one of the leading companies in China's wind power sector, Sinovel (Huarui) began laying off employees starting from November 15th, with 350 staff members being put on leave. By December 10th, this number had risen to 469 people. Industry insiders suggest that the former wind power giants are now facing operational challenges due to overexpansion, internal management issues, and external overcapacity.
According to statistics, in the first three quarters of this year, the company’s revenue was only 3.634 billion yuan, with a loss of 255 million yuan. Its performance dropped by 128% compared to the previous year, marking the first loss in four years for Sinovel. As of September 30, the company's inventory reached 8.5 billion yuan.
On November 15, Sinovel issued a notice titled "Notice on the Suspension of Employees in Certain Positions," affecting 356 employees. The statement mentioned that the company’s business has been negatively impacted by the overall economic downturn and tighter industrial policies, leading to adjustments in production and operations. Many positions were underemployed or eliminated, resulting in a large number of employees without job assignments. Consequently, the company decided to suspend operations when there was insufficient demand or production halts.
Based on Beijing's 2012 minimum wage of 1,260 yuan, employees at the Beijing headquarters may receive a minimum living allowance of 1,080 yuan per month starting next year. Later, Sinovel added three more rounds of layoffs: 21, 35, and 63 employees respectively. The most recent round occurred on December 10, bringing the total number of suspended workers to about 469.
Wu Chaoguo, a senior researcher at China Business Intelligence Network, believes that the difficulties faced by the wind power industry are mainly due to the overall economic downturn and the impact of self-inflicted overcapacity. With high inventory levels and declining product prices, the market is struggling with weak demand. Therefore, Sinovel's losses are almost inevitable.
Sinovel, which started with a capital of 20 million yuan in 2006, saw its net profit grow from 126 million yuan in 2007 to 2.855 billion yuan by 2010. On January 5, 2011, it listed on the A-share market at an issue price of 90 yuan per share, setting a record for the main board market in 20 years and reaching a market value of nearly 100 billion yuan. In just five years, Sinovel created a remarkable wealth growth story in Chinese corporate history.
However, compared to other purely market-driven industries, the wind power sector heavily relies on government support and policy direction. Sinovel's success was no exception. Supported by the National Development and Reform Commission, a series of policies promoting wind energy development were introduced, leading to rapid industry growth. According to the initial plan of the Eleventh Five-Year Plan, the installed capacity was set at 5 million kilowatts, but by 2007, it was adjusted to 10 million kilowatts. In reality, the installed capacity during the Eleventh Five-Year Plan exceeded 40 million kilowatts.
Lin Boqiang, director of the China Energy Economic Research Center at Xiamen University, pointed out that the overall overcapacity in the industry led to significant layoffs and profitability issues for Sinovel, a situation not unique to the company.
With tightening industrial policies, the National Energy Administration has required all provinces to strictly follow wind power project approval plans, prohibiting unauthorized approvals. Sinovel’s high inventory, exceeding 8 billion yuan, has put its funding chain at risk. Additionally, the U.S. made a final ruling on December 18 that China had dumped and subsidized its wind towers exported to the U.S., imposing a dumping margin of 44.99%-70.63% on China’s application-grade wind towers, including those produced by Sinovel.
Externally, the environment is tough, and internal issues have also emerged. Some industry insiders believe that Sinovel’s overreliance on a single product line is a major cause of its struggles. During its peak year in 2010, the company should have diversified its development. Although it filed over 1,000 patents annually, few were applied in production. It needed to strengthen R&D and promote practical applications.
Pang Wenwei, Minister of Wind Power at Xiangtan Motor Co., agrees with these views. He believes Sinovel lacks core technologies and relies on purchasing key components. Its overall strength cannot be considered a leader in the wind power industry. Moreover, Sinovel’s use of double-fed generators with gearboxes resulted in high failure rates and costly replacements, affecting product quality.
Despite these challenges, Sinovel insiders revealed that the company is exploring new strategies, focusing on offshore wind power as a breakthrough. They have established the "Sinowind Wind Power National Offshore Wind Power Technology Equipment R&D Center" and developed 3 MW, 5 MW, and 6 MW wind turbines suitable for land, sea, and intertidal zones. They are also working on 10 MW and above technology. The 5 MW offshore turbine is already in operation, while the 6 MW model has been commissioned and connected to the grid in Jiangsu.
According to Pang Wenwei, for wind power companies to survive and develop, they must first control costs while ensuring quality. Optimizing design, procurement, and bulk buying can enhance competitiveness. China’s wind power industry cannot leap forward; it must first improve the entry standards and change the evaluation system for wind power enterprises. Companies should not be judged solely by production volume but also by product quality, failure rate, and power generation efficiency.
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