Summer is yet to arrive and the weather is still cool, but air
conditioner prices are already a hot topic of discussion.
Analysts say the air conditioner market, which experienced a
downturn last year, won't change much. While consumers could be
easily swayed by news of price cuts by foreign air conditioner
firms, a closer examination reveals that projections of retailers
and manufacturers vary considerably.
Suning Appliance Co Ltd, the country's second-largest electrical
appliance chain, last month announced that foreign brands cut air
conditioner prices by 20 to 40 percent. A week later, the buzz was
that domestic brands were following suit.
Gome Electrical Appliances Group, Suning's rival and the largest
home appliance retailer in China, also released its predictions.
"The possibility of a downward price movement is small," said the
retailer in its White Paper.
Last year, Gome predicted prices would go up while Suning had
forecast a downward movement.
Adding to the confusion over prices, air conditioner makers
themselves have joined the din. The manufacturers have said they
are not cutting prices, the cost of raw material remains high and
the profit margin narrow.
LG Electronics, for instance, said the price cut at some
regional markets was the result of a promotion drive by
retailers.
These conflicting statements from retailers and manufacturers
reflect the battle to control prices in the competitive home
appliance segment, analysts said.
"The discussion on air conditioner prices is always hot in March
and April. Retailers want to grab the attention of consumers with
such discussions," said Xu Dongsheng, from China Household
Electrical Appliances Association.
But despite all the talk, the air conditioner market won't
change much in 2007, according to Xu.
Air conditioner sales declined in 2006 for the first time in 16
years. The sales volume decreased by 7.24 percent while sales
revenue declined by 1.98 percent.
"The market has saturated after surging for decades," said Xu,
"and the time for large-scale updating of air conditioners has not
arrived yet."
Sales of air conditioners declined by 64 percent in first-tier
cities in 2006, while the consumption potential of the third- and
fourth-tier markets has not been fully realized, according to a
White Paper released by the State Information Centre last year.
The air conditioner market is still controlled by domestic
brands such as Haier and Gree, the largest air conditioner makers
in the world by output. Japanese and South Korean brands, with
higher price tags, mainly occupy the high-end segment.
Air conditioner prices slid 30 percent from 2000 to 2005 and
went up by 10 percent in 2006 as copper prices rose. The current
price for copper remains high at 50,000 per ton. Given that the
demand will remain low in the following years, prices of air
conditioners in 2007 are not likely to change much, Xu said.
(China Daily April 18, 2007)