Source: Department of Information Consulting of CHEAA
China’s home appliance industry has seen its economic indicators continuously going up in 2017 thanks to its efforts in technology upgrading and product mix rebalancing. The main operating revenue from Jan to Aug posted 1.08 trillion RMB, a year-on-year rise of 17.3%, and profit for the same period registered 67.99 billion RMB, a year-on-year rise of 8.5%.
1. Domestic sales
Air conditioner sector boomed in both output and domestic sales for the first three quarters of 2017, resulting in a short supply of compressors and parts. This was driven by the thriving housing market in 2016, the early summer this year and the restocking move of dealers and enterprises after their destocking last year. Besides, kitchen appliance sector as well as emerging categories including dishwashers, vacuum cleaners and water purifiers also saw exciting performance.
Mid- to high-end products, such as front load washers, large-capacity, multi-door and frost-free refrigerators, and air conditioners rated grade 1 in energy efficiency, stood out in domestic sales. Large enterprises with strong brand recognition or enterprises with strong competitiveness in niche markets posted strong track records. Low end products were hard to sell.
Online sales surged with a year-on-year growth of more than 50%, while in-store sales shrank, posting negative growth.
Most categories expanded their outputs in 2017. Refrigerator sector reversed its two-year long sliding trend.
What’s worth noticing is that gas water heater sector is expected to further expand powered by policies including energy conservation and emission reduction, west-to-east gas transmission project and coal-to-gas project.
For the first half of 2017, export value of home appliance industry has grown by 7.7% year-on-year to post 31.05 billion US dollars. The first quarter saw a year-on-year rise of 5.9% in export value while the second quarter 8.8%. The aggregate export value from Jan to Aug registered 41.53 billion US dollars, a year-on-year increase of 7.1%. The growth rate went down by 0.6% from last year’s growth rate. Taken exchange rate fluctuation into consideration, the actual drop was around 4.6%. The aggregate import value posted 2.62 billion US dollars, a year-on-year rise of 17.5%, leading to a trade surplus of 38.91 billion US dollars, a year-on-year rise of 6.5%.
Large appliances and portable appliances as well as parts and accessories have all maintained a rise in both export volume and value since March 2017, with large appliances climbing at a steady pace, portable appliances slowing down in growth rate while parts and accessories growing fast. Of all categories, export price of vacuum cleaners has been at a high level, with its export value growing faster than volume by 6%. Wireless charging vacuum cleaners have seen a clear rise in exports.
Exports to Asia and Europe have reached a historic best from Jan to Aug with a year-on-year rise of 8.5% and 9.5% respectively. The growth rates have gone up by 6.6% and 1.1% from last year respectively. Exports to Europe took up 24.7% of all exports of China’s home appliance industry, up by 0.5% from last year, while exports to North America grew by 1.9% year-on-year to account for 23.9%, down by 1.2% from last year. Exports to Latin America have grown by 16.7% year-on-year, up from last year’s -19.2%. Exports to Africa continuously went down. Exports to the 65 countries along the route of China’s Road and Belt Initiative have grown fast by 10.8% year-on-year to post 12.12 billion US dollars.
4. Industry transformation and upgrading
(1) R&D: China’s home appliance enterprises have stepped up investment in R&D, and have been actively deploying their global R&D resources.
(2) Product mix: To stay close to the trend of consumption upgrading, enterprises have been rebalancing their product mix with more high-end and differentiated products rolled out to address consumers’ pain points.
(3) Smartization: Smartness has become a selling point of a wide array of home appliances. Enterprises’ efforts in building smart manufacturing facilities and upgrading smart production lines and processes have come a long way. Standard bearers have progressed fast.
(4) Global strategy: Home appliance enterprises have been exploring their strategies to further go global. Through mergers and acquisitions, brand authorization and channel cooperation, they take over the brand influence, technologies, channels and manufacturing capacities of renowned enterprises, and through establishing overseas facilities, brand marketing, overseas e-commerce operations and overseas exhibitions, they effectively improve their brand recognition, reputation and integrity abroad.
(5) Operation: Enterprises have changed from a manufacturing-oriented production to a consumption-oriented production, featuring flexible manufacturing, customization and personalization. Channel wise, they offer both bricks and clicks, with online channels seeing continuous rising sales and in-store channels transforming to an O2O mode. As to supply chain, they put more weight on their information sharing and interactions between clients and suppliers.
5. Influencing factors
1. Increased per capita disposable income drives up consumption need.
2. Sales area of commodity houses continues to go down.
3. Price of bulk stock bounces back to a high level, putting mounting cost pressure on enterprises.
4. The US dollar is going weak while the RMB going strong at a steady pace.
6. Outlook on the 4th quarter and year 2018
(1) Domestic sales
Under the influence of the government’s policies of tightening housing market regulations since Sept 2016, the price rise of raw materials, high inventories of some categories, consumption cycle and high cardinality, domestic sales of home appliance industry is expected to slow down its growth rate. But powered by consumption upgrading and the rising trend of smartization, China’s home appliance industry is set to continue its efforts in technology upgrading and product mix rebalancing to further improve its competitiveness and let its voice be heard.
As global economy continues to recover in the coming 2018, China’s home appliance industry is expected to see climbing performance, yet its transformation to a new global strategy is still urgent amid risks posed by global trade protectionism, capacity transfers of multinational corporation, and pressures coming from overseas brands, channels and services.