The ongoing trade war between the U.S. and China has impacted many industries, especially the solar energy sector. The U.S. has imposed heavy tariffs on Chinese solar panels, presenting a significant opportunity for Indian companies. This policy shift has directly benefited Indian businesses, allowing them to capitalise on the American market’s increased demand for non-Chinese solar products.
In this article, we will examine the effects of this policy, particularly how Indian companies are using this opportunity to establish themselves in the global solar market.
What’s Happening?
The U.S. recently decided to impose high tariffs on solar cells, electric vehicles (EVs), batteries, and key minerals sourced from China. Effective September 27, 2024, these tariffs include a 100% tax on EVs, a 50% tax on solar cells, and a 25% tax on EV batteries and other critical minerals. Additionally, from 2025 onward, polysilicon — used in solar panels — will face a 50% import tax.
However, the U.S. Trade Representative’s Office (USTR) has granted temporary exemptions on solar cell and wafer production machinery, lasting from January 1, 2024, to May 31, 2025. This opens up new possibilities for Indian companies in the U.S. market, potentially giving Indian solar and EV sectors a competitive advantage on the global stage.
Why Has the U.S. Imposed Tariffs on Chinese Products?
This move aims to support domestic companies and curb the influx of low-cost Chinese imports. The recently introduced Inflation Reduction Act (IRA) plans to invest $370 billion in clean energy in the U.S. However, with China dominating over 90% of the global production of solar modules, wafers, and polysilicon, as well as 70% of EV production, the U.S. has sought to reduce its dependence on Chinese imports.
In June 2022, the U.S. imposed anti-dumping and anti-circumvention duties on imports from Cambodia, Malaysia, Thailand, and Vietnam, though these countries were given tax-free status for solar products until June 2024 to ensure a steady supply.
The Rise of Indian Companies
The U.S. tariffs on Chinese products have been advantageous for Indian companies. According to the Financial Times, Heliene, a solar panel manufacturer in Minnesota, entered a $150 million joint venture with Premier Energies, India’s second-largest solar cell manufacturer, to establish a new factory in the U.S.
Heliene, which previously sourced cells from Vietnam and Malaysia, now primarily imports from India. Additionally, Waaree Energies, one of India’s largest solar module manufacturers, has seen significant revenue growth from exports to the U.S.
What’s in it for Investors?
India’s solar product exports surged by 227% in 2023, reaching $1.8 billion, with 97% of exports going to the U.S. India’s solar module production capacity reached 64.5 GW, while solar cell manufacturing capacity stands at 5.8 GW, projected to exceed 150 GW and 75 GW, respectively, by 2026.
The Indian government’s 2024-25 budget allocated Rs 10,000 crore to a central scheme for solar power grids. Furthermore, the PM Surya Home Free Electricity Scheme, introduced in February 2024 with an outlay of Rs 75,000 crore, received a budget of Rs 6,250 crore. These initiatives present an attractive opportunity for investors interested in the solar sector, with Indian companies poised to boost both production and exports.
What’s Next?
India’s solar energy sector is advancing rapidly. As of September 2024, India’s solar power generation capacity stands at 90.76 GW, while the total installed renewable energy capacity is 201.45 GW, with a target of 500 GW by 2030.
The U.S. tariff policies have granted Indian companies a sustainable advantage, reinforcing India’s journey toward self-reliance in the solar sector.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The companies mentioned in the article are for information purposes only. This is not an investment advice.
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