Air conditioner sales declined in China for the first time in 16
years, and dozens of brands have disappeared from the market,
according to a white paper released by the State Information Center
(SIC).
The merger of enterprises will go further next year, the report
said.
The white paper, on the air conditioner retail market in key
cities this year, shows that the sales volume decreased by 7.24
percent, and sales revenue declined by 1.98 percent. This is the
first time the sales of air conditioners dropped since monitoring
began in 1991.
Cai Ying, head of SIC's marketing information division, said
Chinese air-conditioner manufacturers experienced unprecedented
difficulties this year. The market has almost come to saturation,
with the sales of air conditioners declining by 64 percent in
first-tier cities, and the consumption potential of the third- and
fourth-tier markets has not been fully realized, she said.
The international anti-dumping tide, Cai added, as well as the
implementation of the European Union's WEEE (Waste Electrical and
Electronic Equipment) Directive and the RoHS (Restrictions on the
Use of Certain Hazardous Substances) Directive has had a negative
influence on exported air conditioner.
Apart from the decline of the domestic and international
markets, the rise of energy and raw materials prices increased the
cost of manufacturing and further narrowed the profit margin. The
price of copper, for instance, has risen from less than 30,000 yuan
(US$3,750) per ton at the end of 2005 to more than 80,000 yuan
(US$10,000). That, in turn, has increased the cost of each air
conditioner, which on average needs 6 kilograms of copper, by 200
yuan (US$25) to 300 yuan (US$37.50).
Cai said the decline of retail markets in the largest cities,
however, is only one of the many difficulties manufacturers face.
The greater threat lies in the increase in loans and use of too
much storage space caused by the deteriorated market.
"That has caused trouble in the cash flow of many enterprises,"
Cai said. "These problems have directly influenced the security of
the whole air conditioning industry."
The fast expansion of air conditioner industry in recent several
decades is the cause of the current problem. "The domestic air
conditioning industry needs to establish a new competitive
attitude," said Lu Shenghua of the China Home Electrical Appliance
Association. What's more, the demand for air conditioners will
continue to be low in the next few years, he added.
The market decline and fierce competition have forced many
brands to recede from the market. The white paper said 52 brands
are being monitored by the State Information Center this year,
compared with 69 in 2005.
The top 20 brands account for 97 percent of the sales. "The
number of air conditioner brands will stay at 15 to 20 in 2007,"
Cai said. "The merger of enterprises and the integration of
resources will go further."
Despite the overall downturn, the demand for products using
advanced technology that perform multiple functions keeps
increasing. The latest SIC data show that the sales volume of
higher-end air conditioners increased by 47 percent, whereas that
of air conditioners priced below 1,500 yuan (US$187.50) declined by
46 percent.
The major manufacturers have sensed the trend and started to
shift their focus to technological innovation and the development
of multifunctional products. Haier, the leading air-conditioner
manufacturer in China, recently announced that next year it would
start to manufacture new products that emphasize on air cleaning
and humidity enhancing functions besides its cooling and heating
functions.
(China Daily October 6, 2006)