Capital Goods Sector Update : Relaxation for Chinese firms raises competition concerns by PL Capital
The Government of India has granted a 2-year exemption under the Public Procurement Order (PPO) to 4 Chinese-owned electrical equipment manufacturers: TBEA Energy India, Nanjing Electric India, New Northeast Electric India and Taikai Electric (India). The exemption will allow them to participate in public sector tenders for select transmission equipment, and is likely to cover critical transmission equipment, including bushings, insulators, circuit breakers, power transformers, GIS switchgears and others
We expect the exemption likely to have a negligible impact on the current order books of HVDC players such as GE Vernova T&D India, Hitachi Energy and Siemens Energy, given their technological leadership, strong product portfolio and dominant market share across the HVDC product basket. Moreover, these MNCs have envisaged total capex of ~INR50bn to strengthen domestic manufacturing capabilities for high-value HVDC equipment. On the other hand, the exempted Chinese players in India remain limited in terms of capabilities and manufacturing capacity. However, we believe the exemption could lead to some price normalization in overlapping product categories with HVDC players, although the strong multi-year demand outlook is likely to mitigate any meaningful impact.
However, the exemption could increase competitive intensity across select pricesensitive power equipment segments over the short to medium term. Domestic manufacturers with exposure to products such as GIS, transformers, reactors, circuit breakers, insulators and bushings could face heightened competition as the eligible supplier base expands. This is likely to result in more competitive bidding and some moderation in pricing across select product categories. At the same time, improved equipment availability and reduced procurement lead times should support faster execution of transmission projects amid a strong multi-year demand pipeline
Even if the government were to extend market access for these Chinese-owned manufacturers beyond the current 2-year exemption, their ability to meaningfully gain market share would depend on incremental investments in localization and manufacturing capacity in India, in line with the government's long-term emphasis on domestic manufacturing and minimum local content requirements for HVDC and other T&D projects. Given the limited domestic manufacturing footprint of most exempted entities, we believe the move is a transitional measure to bridge the near-term supplydemand gap until domestic capacity expands and procurement lead times across key product categories normalize. However, these are our preliminary assessments, and we await the detailed government notification.
Why has the government granted this exemption?
India is witnessing an unprecedented transmission capex cycle led by renewable energy integration, green energy corridors, interstate transmission projects, and large-scale grid modernization. Simultaneously, domestic manufacturers are operating at historically high capacity utilization levels, resulting in extended delivery schedules for critical power equipment.
Against this backdrop, allowing select Chinese-owned manufacturers with established manufacturing facilities in India to participate in PSU tenders, is expected to improve equipment availability, reduce procurement timelines and support the timely execution of strategic transmission projects, while continuing to enforce domestic value addition through certain local content requirement. Although existing domestic manufacturers are aggressively expanding capacity to address the strong demand outlook, the industry continues to face a near-term supply-demand mismatch, particularly in critical transmission equipment. We believe the government's decision is primarily aimed at bridging this temporary supply gap and preventing delays in the execution of large transmission projects.
Chinese players: Capacity remains the key constraint
While the exemption broadens market access, manufacturing capability remains an important limiting factor. Among the exempted companies, TBEA India possesses meaningful transformer manufacturing capacity (~20,000MVA as of Dec’25) and established operations in India and is already supplying to private players, positioning it to participate more actively in PSU tenders. In contrast, Nanjing Electric, New Northeast Electric and Taikai Electric currently have relatively limited domestic manufacturing capabilities compared with established Indian OEMs. Consequently, their ability to significantly increase market share over the near term is likely to remain constrained. Furthermore, most domestic manufacturers continue to operate with healthy order books extending beyond FY27–28
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