Wind Turbine OEM consolidation; slow and steady wins the race

Published October 2015

Joe Phillips looks at recent trends in the global wind turbine supply market.

With today’s announcement of the acquisition of Acciona Windpower by Nordex, one might be tempted to think that the wind turbine OEM market is entering a long overdue phase of consolidation. But a quick glance at the latest market data shows that we still might have a very long way to go.

It’s not immediately obvious why a maturing industry such as wind energy has not yet managed to whittle down the manufacturers to a more manageable number. After all, we are talking about a global market worth ~€50Bn and a technology which has converged on a relatively narrow range of designs, proven over a couple of decades of commercial deployment.  Yet, the top 6 manufacturers only represent around half of the global market.  Despite this, when benchmarked against a vaguely comparable industry – the automotive sector – the market leaders, Vestas and Toyota, have a strikingly similar market share; 11-12%.

So what’s going on? The wind OEM market is either “too fragmented” or it isn’t. The answer lies in the long-tail of the distribution. In truth, the market leader is not Vestas or GE or Goldwind, it is the “others” category – second and third tier players who in aggregate account for about a third of the global market. In fact, by joining forces Acciona and Nordex are likely to jump out of the “others” pot and into the top 10 proper.

My view is that regulatory requirements, most notably those relating to local content, have created an environment which encourages national or regional champions to emerge thereby swelling the number of second and third tier players.  The unique nature and size of the Chinese market can also not be under-estimated, although arguably this is the one geography which has seen the greatest OEM consolidation over the last 5 years.

If I had to speculate, future consolidation will not come in the form of mega-mergers of the Tier 1 OEMs, rather a gradual reduction of the “others” pot as regional champions court each other to find a mutual fit. This is positive thing for the wider industry as it keeps competitive pressure strong, whilst improving economies of scale for a more efficient supply chain. So a slow and steady trickle of modest-sized mergers is perhaps a good prognosis for an industry which needs to keep the pressure up on cost reduction.

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