China’s HVAC & R sector: temporary downturn but will recover soon

China’s HVAC & R sector: temporary downturn but will recover soon

China Household Electrical Appliances Association released the latest output, sales and exports numbers of China’s HVAC&R sector. China’s HVAC&R sector: temporary downturn but will recover soonAlthough the sales of refrigerators, freezers and air-conditioners slowed down in 2011, manufacturers believe the downturn is temporary and will recover soon. Updating products becomes their strategy to increase sales in 2012.

On 13 January 2012, the China Household Electrical Appliances Association (CHEAA) held a media conference to review the development of the Chinese home appliance industry in 2011. Output, exports and sales numbers of China’s HVAC&R sector were released during the conference.

Boosted home appliance production

CHEAA said that stimulated by the Chinese government’s home appliances rural subsidy scheme and home appliance replacement programme, the home appliances industry achieved breakthroughs in output and exports.

In the HVAC&R sector, the manufacturing and export saw a record growth surge in 2011. From January to October 2011, the combined output of household refrigerators reached 63 million units, a year-on-year increase of 8-9%; the production of air-conditioners increased by 20% and reached 95-97 million units. The export delivery value of refrigerators, freezers and compressors increased by 3.3%, 10.2% and 17.7% respectively.

Growth of sales in China’s HVAC&R sector slows down

The sales of refrigerators, freezers and air-conditioners slowed down in 2011. According to CHEAA, the sales of refrigerators dropped 18%, the sales of air-conditioners dropped 12% in China’s 24 cities in 2011. The growth rate of exports in the sector also declined over the same period in the previous year. Exports of this sector are not looking promising for 2012 especially considering the continuing decline in the US economy, the unresolved European debt crisis and stagflation in new markets. Lack of market demand in both domestic and overseas markets will be the main difficulty facing China’s HVAC&R sector in 2012, from which it traditionally derives high revenue.

Reasons for the slowdown in sales growth include fluctuation of the macro economy, turbulence in the price of raw materials as well as the downturn of the real estate market in China.

A period of upgrading

The business environment for the Chinese HVAC&R industry is not very promising based on the sales and exports in 2011. Many Chinese home appliance manufacturers have begun to revise their market strategy to spur domestic consumption and increase competitiveness in overseas markets. Updating products seems to be the common choice of many manufacturers.Haier, one of China’s biggest household appliance manufacturers stresses innovation and high technology in its market strategy this year and will push for market share through premium products such as frost-free and three-door refrigerators. Midea, another home appliance producer in China, is also planning to finish upgrading its most modern air-conditioner in two years. The updating aims to improve quality and add innovative elements for their low-carbon products. Manufacturers in China have realised high efficiency products would better meet consumers’ demand and increase sales.

Most Chinese home appliance manufacturers believe the downturn is temporary and recovery is around the corner. Although the end of China’s national home appliance replacement programme in 2011 cooled down the household appliance market, there still exists large market potential because many Chinese families need to replace their old household appliances in 2012.

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