Array Technologies Downgraded Amid Rising Tariff Concerns in India and Mexico

Array Technologies Faces Downgrade as Global Tariffs Escalate

Array Technologies, Inc. (NASDAQ:ARRY), a key player in the solar tracking industry, received a downgrade from Bank of America (BofA) on Friday, shifting its rating from 'Neutral' to 'Underperform.' The investment bank also revised down Array's price target to $7 from $8. This adjustment reflects heightened concerns over escalating tariff pressures in key international markets, specifically India and Mexico, which are expected to significantly impede the company's profitability outlook.

Detailing the Tariff Landscape and Its Impact

The downgrade is rooted in a re-evaluation of Array Technologies' financial prospects following the imposition of new and increased tariffs. Notably, tariffs on solar products from India, a crucial export market for modules to the U.S., have doubled from 25% to a substantial 50%. Concurrently, Mexico has introduced a new 25% ad valorem duty on gearsets and other components that do not meet USMCA origin requirements. These measures are designed to increase the cost of imports and influence manufacturing origin, directly affecting companies with international supply chains like Array Technologies.

Array had previously trimmed its 2025 gross margin guidance from 29-30% to 28-29% due to existing commodity and tariff pressures. However, BofA analysts now consider even this revised target to be "unrealistic," projecting structural margins closer to 27% through 2027. While Array aims to pass approximately three-quarters of these increased costs to its customers, the company is also sharing some benefits from the Inflation Reduction Act's (IRA) 45X production credits, which could further impact net profitability.

Analysis of Market Reaction and Strategic Challenges

The market's bearish sentiment surrounding Array Technologies stems from the direct and indirect consequences of these trade barriers. Dimple Gosai, a research analyst at Bank of America, highlighted "heightened margin risks and limited near-term catalysts" as primary drivers for the downgrade. Despite a nearly 50% rally in Array's stock in the preceding month, optimism surrounding "safe harbor" demand pull-forward appears "overstated," according to Gosai. She noted that smaller developers are more inclined to prioritize transformers over trackers in their safe harbor strategies.

BofA remains skeptical that safe harbor incentives will generate significant near-term demand, a view echoed by Array itself, which has cited permitting, interconnection delays, and labor bottlenecks as constraints on accelerating project schedules. While Tier 1 customers have largely secured safe harbor benefits, the engagement among Tier 2 developers remains mixed, suggesting that any potential disruption from these factors might manifest years into the future.

Broader Context: Global Trade Tensions and the Solar Sector

These tariff developments are not isolated incidents but reflect broader geopolitical and economic pressures influencing global trade. The significant increase in tariffs on Indian solar modules by the U.S., reaching up to 50% by August 27, 2025, according to reporting, could erode India's price advantage and raise costs for American solar developers. India's solar module exports to the U.S. surged 23-fold between FY2022 and FY2024, absorbing approximately 99% of these panel exports in 2024, valued at nearly $2 billion in FY2024. Moody's has warned that these tariffs could undermine India's manufacturing ambitions.

Similarly, the new tariffs on non-USMCA originating goods from Mexico, including those affecting critical auto parts and steel/aluminum, underscore a trend toward more protectionist trade policies. This binary tariff structure, where USMCA-originating goods enjoy zero tariffs while others face a 25% duty, forces companies to re-evaluate their supply chain configurations.

Expert Commentary Underscores Headwinds

Analysts emphasize the challenging environment. Bank of America's assessment, applying peer multiples in the solar and clean energy sector alongside discounted cash flow analysis, underscores a cautious outlook. The prevailing sentiment is that near-term headwinds, exacerbated by rising tariff costs and less impactful safe harbor benefits than initially hoped, currently outweigh Array's positives.

"Near-term headwinds outweigh these positives, particularly with tariff costs set to rise and safe harbor benefits less impactful than hoped," stated Bank of America's research note, summarizing the prevailing sentiment.

Looking Ahead: Navigating a Complex Trade Landscape

Moving forward, Array Technologies is actively pursuing market share gains in U.S. utility-scale trackers, leveraging its domestic content positioning and introducing new products such as Omni and Skytrak. However, the persistence of elevated tariff costs, particularly the impending 25% tariffs on Indian components by November, will continue to exert pressure on profitability.

Investors will closely monitor how Array manages to mitigate these escalating costs, whether through further supply chain adjustments, greater success in passing costs to customers, or maximizing benefits from U.S. production incentives. The trajectory of global trade policies, particularly those impacting the renewable energy sector, will remain a critical factor in determining Array Technologies' financial performance and stock valuation in the coming quarters.