Investing in Solar Panels – Why Chinese Solar Panels Are Making Investors Rich

Anyone interested in investing in solar panels needs to hear about the furour surrounding Chinese solar panels. Solarfun Power Holdings Co. is a Chinese company that makes solar panels at considerably smaller cost than European companies. For example, the large German company Schott AG produces panels at least a 35% higher cost that this Chinese company. A Solarfun panel which has a 200-watt capacity is on sale for 397 euros. Compare this to the 611 euros for an almost identical model from Schott. Cheap solar panels are in huge demand in many countries in Europe, and imports from China have soured in recent times.

Solarfun shares jumped an incredible 73% in just one quarter this year, which beat all but one of the 500 members of the Standard and Poor 500 Index. Even after these massive gains, on the whole Chinese stocks are still cheaper than Western stocks of the same type in terms of price to earnings gains. Trina Solar Ltd, another producer of cheap solar panels from China, is up no less than 62% for the last quarter.

Chinese producers of solar panels have benefited greatly from government loans totaling more than $20 billion over the last year. Western producers do not have access to such government funding, and have to seek it out in the private sector.

The Chinese are now considered in the industry as the “ones to beat”. In the long term, they are going to be the big winners, as their ability to produce at low prices is unlikely to change anytime soon. Chinese manufacturers have received more than double the amount of orders this year so far compared to last year, and a big reason for this is that they have kept their prices low whilst rapidly improving the quality of their products.

The majority of the Chinese producers have low multiples, and are all considered to be great value – they all offer growth stocks. They have more modern production equipment than the Germans and tremendous ability to expand at minimal cost.

Whilst it is all good news in China, western firms are losing their market share fast. They are looking for ways to cut production costs but of-course there is no way they can go as low as the Chinese. Germany is the world’s largest market for solar panels, and pricing for solar park builders got even more important after the country lowered feed-in tariffs that end customers pay for solar produced electricity by 16% this summer.

With Chinese manufacturers set to increase their global market share to 60% this year, it looks like things are only going to get better for them. If you are interested in investing in solar panels, take note!

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