Toyo of Japan dodges US tariffs with new solar cell plant in Ethiopia

Toyo, a Japanese solar products manufacturer, plans to establish a solar cell factory in Ethiopia with an annual capacity of 2 GW. The facility, situated in the city of Hawassa, will supply components to a solar panel plant Toyo is setting up in the US. By producing in Ethiopia, Toyo will be able to circumvent recent US tariffs imposed on solar products sourced from Malaysia, Vietnam, Thailand, and Cambodia. Currently, Toyo produces in Vietnam; however, Ethiopia is exempt from US tariffs on the widely used double-sided solar cells.

The US Commerce Department recently imposed tariffs on imports of solar cells and panels from the four Southeast Asian countries, with rates ranging from 2.85% for Vietnam to 23.06% for Thailand, alongside company-specific duties. These tariffs stem from allegations that Chinese manufacturers have been flooding the US market with products made in third countries. Although the preliminary duties were generally lower than anticipated, past solar trade cases suggest that the final rates are likely to be higher.

Toyo is not alone among Asian companies exploring African production bases to navigate US and EU tariffs on green energy products. South Korean white goods manufacturer LG Energy Solution, for example, has indicated it is eyeing Morocco to manufacture electric vehicle (EV) batteries for export to Europe. In addition to having an established automotive manufacturing industry, Morocco benefits from free trade agreements with both the EU and the US, allowing manufacturers to avoid tariffs affecting imports from other countries. Morocco’s ample reserves of key minerals for EV batteries –such as phosphate, cobalt, lithium, and manganese – further enhance its attractiveness. Under the US Inflation Reduction Act, EV buyers can access tax credits if the critical minerals in their batteries are sourced from the US or its free trade partners. Several Chinese EV supply chain companies, including Gotion High Tech, Hailiang, Shinzoom, and BTR New Material Group, have also announced plans to set up production in Morocco.

Egypt, too, is positioning itself as a manufacturing hub for export-oriented companies. Singapore-based solar products company Elite Solar recently revealed plans to establish a solar photovoltaic cell manufacturing and module assembly facility in the Suez Canal Economic Zone. While some of the production will meet Egyptian solar energy demand, a substantial portion will be exported, particularly to the US.   

In addition to tariff advantages, Toyo cited Ethiopia’s ample green energy resources as a key factor in its decision to invest approximately US$60m in the new factory. Ethiopia generates around 90% of its electricity from hydropower, with wind accounting for 8% and thermal sources contributing the remaining 2%. This abundant supply of green energy aligns with Toyo’s objective to reduce carbon emissions across its supply chain – an increasingly important factor for utility-scale electricity project developers in the US who seek low-carbon-footprint products.

Toyo plans to begin preparing the new facility in November 2024, with production slated to commence by the end of the first quarter of 2025.

 

References

‘The new U.S. clean tech tariffs will have global impacts’, Carnegie Endowment for International Peace, 16 May 2024

‘Morocco’s emergence as EV manufacturing hub worries Spain’, Morocco World News, 20 May 2024

‘Exclusive: LGES in talks with Chinese material firms to make low-cost EV batteries for Europe’, Reuters, 24 July 2024

‘LG Energy Solution eyes Morocco for EV battery plant’, Morocco World News, 24 July 2024

‘The U.S.-Morocco FTA after twenty years’, The Washington Institute for Near East Policy, 30 August 2024

‘EliTe Solar to establish 8 GW solar manufacturing hub in Egypt’, EliTe Solar, 10 September 2024

‘US sets preliminary new duties on solar imports from Southeast Asia’, Reuters, 01 October 2024

‘US imposes duties on solar panels from Southeast Asia’, BNN Bloomberg, 01 October 2024

‘TOYO Co., Ltd announces plans for a 2 GW solar cell manufacturing facility in Ethiopia’, Toyo, 14 October 2024

‘Japan's Toyo to produce solar cells in Ethiopia for US plant’, Reuters, 14 October 2024

‘Beijing is making inroads in North Africa’, Atlantic Council, 15 October 2024