Grape Solar playing to win in solar trade dispute

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Grape Solar CEO Ocean Yuan is betting his company can survive solar price wars by staying focused on consumers.

It would be easy to assume that the threat of U.S. tariffs on imported Chinese solar panels would cause Grape Solar to wither on the vine.

The Eugene-based company sells solar panels in which 80 percent of the components are sourced from Chinese manufacturers.

But Ocean Yuan, the company’s majority owner and perpetually optimistic CEO, believes Grape Solar is positioned to withstand the major marketplace shift that’s expected should the U.S. Department of Commerce decide to take action against China to prevent the company from exporting low-cost solar panels to the United States.

That’s because Grape Solar sells direct to consumers, which keeps costs in line.

“We would be better off than anybody else, in terms of price protection,” Yuan said.

Unlike other major solar panel brands, Grape Solar sells its panels directly, not through third-party distributors and installers, who Yuan said typically mark up the price of panels on their way to consumers.

The 10-person company assembles residential solar energy kits comprised of panels, inverters and racking kits at its operations in Eugene.

The U.S. Department of Commerce is investigating claims made last month by a coalition of American solar manufacturers — led by Hillsboro-based SolarWorld Industries America Inc. — that China has been dumping low-cost, subsidized panels into the U.S. market.

The Coalition for American Solar Manufacturing wants the federal government to make a determination of “critical circumstances” that would impose import duties on imported Chinese panels to offset any improper trade tactics. The coalition wants tariffs applied retroactively for three months.

“We believe the Department of Commence investigation will show that Chinese government and Chinese solar manufacturers are — and have been — engaged in illegal practices that threaten to decimate a vitally needed renewable energy industry,” Gordon Brinser, CEO of SolarWorld’s U.S. division, said earlier this month.

“China’s continued practice of scoffing at international and U.S. trade law and failing to meet requirements of the (World Trade Organization), including reporting its vast array of subsidy programs, are extremely disruptive to business plans of countless employers who are dependent on Chinese imports,” Brinser said.

But Yuan, much like executives from other companies who have come to rely on low-cost Chinese panels, believes the trade action will ultimately lead to significantly higher prices for consumers.

To that end, Yuan believes his ability to reach directly to consumers will keep his company growing.

Though the company’s original business model called for setting up regional assembly plants across the country and selling to installers, Yuan said Grape has since shifted its focus purely on the consumer.

Yuan won’t disclose the company’s sales figures. But it’s a safe bet that Grape has gained at least some acceptance in the marketplace based upon the company’s partnerships with major retailers Costco, Amazon.com and Home Depot.

While he continues to seek new distribution partners — the Lowe’s chain of home improvement stores is on his radar — the ramifications of an ongoing solar trade war with China have clouded the future.

The company launched two years ago as Centron Solar in partnership with a consortium of several dozen Chinese manufacturers involved in the solar energy supply chain.

At its launch, Yuan, former president of Chinese cell and module-maker SolarFun Holdings Ltd.’s U.S. operations, set out on a low-cost strategy to deliver a product that appealed to cost-conscious households.

It started working with Issaquah, Wash.-based Costco Wholesale Corp. in July 2010, when it began selling solar panels inside Costco Warehouse stores in nine test markets, including Washington and Oregon. By April, its distribution had widened to more than 60 brick-and-mortar Costco stores nationwide as well as Costco.com.

In August this year, Atlanta-based Home Depot confirmed that Grape Solar products could now be special-ordered through the chain’s stores.

“Ocean has built his business to not be dependent on the Chinese,” said Mark Bachman, an analyst in Lake Oswego who tracks the global solar industry for Boston-based Avian Securities. “The whole idea is that he doesn’t have to get it manufactured there. He can get it manufactured in South Korea, Taiwan or other places that are friendly to the U.S. that already have very good trade relations.”

On Monday, Yuan said he has been in talks with several Chinese manufacturers about developing a remapped global supply chain that shifts some manufacturing from China to South Korea and Taiwan, culminating in Eugene where he would expand his operations to assemble panels for Chinese brands as well.

Doing so would help to avoid being impacted by any U.S. tariffs.

“All these potential risks and everything, we saw through the whole thing,” Yuan said. “I could have started this company as a distributor for Suntech or other Chinese panels, but that business model wouldn’t work. (Being a distributor) is very, very difficult to do in this business.”

@ErikSiemers | esiemers@bizjournals.com | 503.219.3418