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Japan’s solar market has been shrinking since 2015, causing numbers of solar-related bankruptcy to reach a new record in 2016. Bad sale performance, failed business model and capital deficiency are the three major reasons for the increased bankruptcies.
Japanese research firm Tokyo Shoko Research (TSR) released a report regarding solar-related company operation, showing that 65 relative companies went into bankruptcy in 2016, up by 20.4% from 2015. The data further shows that the number of bankrupted solar companies in 2016 was the highest since 2000, and the total debt broken record as well.
TSR’s report revealed that the number of solar-related bankruptcy in the first half of 2016 was 30, while the number of the second half of 2016 was 35. Simply in December 2016, 10 solar companies went bankrupted, according to a Nikkei BP report that cited TSR’s research.
The record-breaking bankruptcy number was resulted from the changed industry environment brought by consecutively reduced feed-in tariff (FIT) rates and solar tenders that will be held since October, 2017, explained TSR. Due to the shrinking demand and challenging environment in Japan, TSR expects companies that are not healthy enough would continuously become failed in operating through 2017.
Financial management is the key to survive
Among the 65 bankrupted companies, 23 were in the debt category ranged from JPY 10 to 50 million, representing 35.3% of all. 22 were in the category of JPY 100~500 million and the ratio was 33.8%, followed by 13 companies in the category of JPY 50 ~ 100 million, which represented 20% of all.
Bankrupted companies with debt over JPY 1 billion in 2016 were less than in 2015, while those with debt between JPY 10~50 million increased by 53.3%, representing a more challenging environment for smaller-scaled companies.
TSR’s report shows that 35 companies went bankrupted majorly due to bad sales, 11 companies went into bankruptcy because of business failure, eight bankruptcy cases were resulted from capital scarcity. Cases of business failure boomed by 83.3% compared with 2015.
Impractical, vague business strategies accounted for business related bankrupt cases. On the other hand, imbalanced prices and orders that resulted in inadequate capital and inventory management explained the capital-relevant cases.
Many Japanese solar companies entered into the industry when the solar market started to expand in the nation several years ago. However, those that have neither stable financial basis nor precise vision to the market will be very likely to go bankrupted.
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