CITIC SEC: Lowering export tax rebate rates to speed up clearing of outdated capacity in the photovoltaic industry.

CITIC SEC released a research report stating that the adjustment of the photovoltaic export tax rebate rate, although it may cause short-term profit impacts on manufacturers, the actual impact is small. Top manufacturers have the ability to push product prices downstream, stabilize international market prices for photovoltaic products, avoid dumping, accelerate the elimination of outdated production capacity in the industry, achieve high-quality development, and benefit the leading companies. Key recommendations include: 1) top battery component companies with global brand, technology, and channel advantages in the photovoltaic market worldwide; 2) photovoltaic manufacturers' overseas production competitiveness is expected to improve relative to manufacturing trends going overseas, recommending core material suppliers benefiting from global manufacturing and leading overseas production layouts. Key points from CITIC SEC are as follows: The photovoltaic export tax rebate rate is facing a reduction. On November 15th, the Ministry of Finance and the State Administration of Taxation issued a "Notice on Adjusting the Export Tax Rebate Policy," proposing that starting from December 1, 2024, the export tax rebate rate for certain products including photovoltaic (cells, components) will be reduced from 13% to 9%. Short-term profits for manufacturers may be impacted by this, but it will bring far-reaching benefits for the long-term development of the photovoltaic industry. A 4% reduction in the photovoltaic export tax rebate rate may require component manufacturers to bear an additional cost of 3-4 cents/W, and most manufacturers may not have considered this change in their previous contract prices. This may impact their profitability in the short term, but the actual impact is limited. In the long term, this may optimize the structure of Chinese photovoltaic manufacturers and create far-reaching benefits for trade norms: 1) Moving away from low-price competition quagmire: A 4% cost increase will not shake China's position as the lowest-cost global photovoltaic manufacturing capacity, and it will not have a substantial impact on overseas photovoltaic installation demand. It may push overseas photovoltaic product pricing to rise reasonably, helping the industry break free from low-level competition and value deflation quagmires; 2) Regulating international competition order: Price stabilization, preventing dumping, will reduce the pressure on Chinese photovoltaic products in international trade concerning low-price accusations and "double counter" investigations, helping regulate the international trade competition order; 3) Enhancing competitiveness of overseas bases: Previously, the establishment of overseas factories by domestic photovoltaic manufacturers was mainly based on trade policy considerations, but overseas production costs generally exceed domestic costs. With the weakening of the cost advantage of directly exporting products domestically and the continued uncertainty of overseas trade barriers, manufacturers with overseas production layouts may enhance their competitiveness; 4) Assisting in the elimination of outdated production capacity: Top manufacturers domestically, with brand, product, and channel advantages, have a stronger capability to push downstream prices. On the other hand, tail-end manufacturers relying on low-price competition may face further squeezed survival space, accelerating the differentiation of profitability and competitiveness between industry-leading and tail-end companies, helping in the elimination of outdated production capacity in the industry. Risk factors: Photovoltaic installation growth lower than expected; intensified market competition; policy implementation may be delayed; rising overseas trade barriers; industry production capacity elimination progress slower than expected, etc.