The fierce competition in China's wind turbine market and the rapid rise of Chinese companies are putting tremendous pressure on overseas large wind turbine manufacturers entering the domestic market.

       Recently, Vestas, the world's largest wind turbine manufacturer, was forced to terminate its Hohhot project in China after four years of operation, with several other foreign companies also planning to divest their Chinese projects.

       Vestas was the earliest overseas wind turbine manufacturer to enter the Chinese market. In 2009, its Hohhot factory commenced operations, completing the company's five-factory layout across three locations (Xuzhou, Tianjin, and Inner Mongolia). This time, with the shutdown of the Hohhot facility, the full production lines of two major products—the V52-850 kW and V60-850 kW wind turbines—have ceased. The move will result in 300–350 employees leaving or being reassigned, accounting for approximately 10% of Vestas' workforce in China.

       Informed sources said the two types of kilowatt-class small wind turbines are no longer suitable for the Chinese market, as megawatt-class large wind turbines are now widespread across the country.

       "Vestas initially hoped to promote kilowatt-level products in China's mountainous areas, but after transportation infrastructure improved in some regions (as large turbines require better road and rail transport), larger turbines became viable. Secondly, as early as 2005-2006 when the wind power market took off, Vestas believed it could sell small turbines in China that had already been phased out in Europe. However, many Chinese companies quickly mastered advanced large turbine technology through technical licensing collaborations, rendering Vestas' small turbine strategy obsolete in China and ultimately forcing its discontinuation," the insider told reporters. Just the day before yesterday, Vestas was still promoting small turbines as suitable for China's low-wind-speed regions. But in reality, low wind speed is not directly related to turbine size. "Simply lengthening the blades of high-wind-speed turbines can adapt them to low-wind-speed areas."

       However, Vestas does not admit any mistakes in its "small turbine" strategy. "We have installed over 1,800 V52 and V60 turbines in China, accounting for more than half of Vestas' total installations in the country," Tommelle told the reporter. However, since 2009, Vestas has publicly announced only about 300 units of V52-850 kW and V60-850 kW turbines in China. Even according to Vestas' disclosed figures, the company's current installed capacity in China is only nearly 4 GW, which is far less than Goldwind's and Sinovel's cumulative installed capacities of 12 GW and 10 GW, respectively, by the end of 2011.

       According to Vestas' 2011 annual report, its installed capacity in China was 501 MW that year, a 42% year-on-year decline. Besides Vestas, other overseas wind turbine companies like India's Suzlon and Germany's Repower also saw their market share shrink in China.

"It is difficult for prices to drop significantly and Chinese models cannot be quickly manufactured, which has hurt many foreign companies." A senior executive of United Power told reporters that the current domestic mainstream wind turbine quotations have dropped from 4,612 yuan/watt in 2006 to 3,700 to 3,800 yuan/watt recently, while quotations from overseas companies such as Vestas are as high as 5,000 yuan/watt. "You rarely see large overseas companies participating in bidding for domestic wind farms, because bidding for wind turbines is often based on price. Foreign companies negotiate contracts directly with wind farm investors," the person said.

       In fact, the key reason why some overseas companies are unwilling to cut prices is that the company has a global pricing strategy internally. The pricing of its wind turbines in China must take into account brand, profit, supplier transportation costs, etc., and it cannot be directly determined by China.

       Domestic-funded enterprises will consider comprehensive profits when setting prices. For example, a company will lose money on order A and make back money on order B. Some companies are also willing to change from the initial high profit of 30% to only 5% to 10% gross profit. However, it is often difficult for foreign companies to reach consensus on the pricing methods of these domestic companies. In response to this question, Donmar said: "We will not sacrifice quality in order to reduce costs."

       The internal management of another wind turbine company revealed that the wind turbine blades of some overseas companies used to be about 70 meters long, and the power of the gearboxes was also small. For the Chinese market, it may be more appropriate to use 80-meter blades and large gearboxes.

       Just a few years ago, although overseas companies sold some wind turbines with blades of about 70 meters, Chinese companies were developing new products at an astonishing speed. By the time overseas companies planned to reinvest and adjust blades, gearboxes and engine designs and technical solutions, the market was no longer the same.

       Many of the above-mentioned reasons have caused the market share of large overseas wind turbine companies in China to go straight up a roller coaster ride from the dominance it had three or four years ago.

       At present, the companies with the largest cumulative installed capacity in the domestic wind turbine industry are Goldwind Technology, Sinovel Wind Power, Mingyang Wind Power (MY.NYSE), etc. Vestas, Gamesa, GE, Siemens, Suzlon, etc. are all difficult to enter the top five.