Affected by China’s tightened housing policies, water heater sector slows down its growth in sales for three consecutive quarters in 2018 after saw a surge in 2016 and a continued growth in 2017. At this point, industry players take active efforts in distribution channel deployment and product innovation in a bid to expand the market.

Sales of water heaters struggles to keep a steady overall growth in 2018

Water heater sector started off strong in the first quarter of 2018 with sales up by 8.8% year-on-year to 18 billion Yuan, yet came off early highs starting from April with a fall in sales growth that lasted for three consecutive sectors, according to All View Cloud. From January to August 2018, China’s water heater sector posted retail sales of 49.82 billion Yuan and sales volume 27.035 million units, down by 0.2% and 1.3% year-on-year respectively. When it comes to the last quarter, a high season with intensive promotion festivals, many interviewed industry insiders believe that, the market could pick up from the last two quarters and eventually make the overall performance of the year a steady growth. Behind the softening sales of water heaters is the freezing housing market of China, particularly in first-tier and second-tier cities, where replacement demands start to stand out as the main driving force.

Third-tier and forth-tier markets lead the growth

With great market potential to be tapped, third-tier and forth-tier markets in central and western China have eclipsed the saturated first-tier and second-tier markets to lead the sales growth of the sector.

This landscape started to form years ago as industry players such as Haier, Midea, A.O. Smith, Vanward and Weber put increased efforts in reaching down to lower-tier markets, a strategy that help maintain the steadiness of sales this year in electric water heater sectors. Gas water heaters’ expansion into third-tier and forth-tier cities with gas lines in place becomes a clearer trend in 2018. Solar-powered water heaters, with root in third-tier and forth-tier cities and rural areas, gradually step out of the sluggishness along with the urbanization of China. For heat pump water heaters, the focus is also placed on the same areas, where the houses are more suitable for the installation compared to crowded city apartments. Besides, the long application of this product in southern China also lays a foundation for its expansion.

Products are upgrading

Electric water heaters are going fast-heating, large-capacity and health-oriented in 2018, while gas water heaters invest in solutions to “zero cold water”, constant temperature and also larger water supply. Solar-powered water heaters transition from evacuated tube collectors to flat-plate collectors. Heat pump water heaters put more weight on variable frequency technology and high efficiency.

Enterprises extend portfolio from offering showering solution to include space heating

Residential space-heating sector develops fast in recent years, as China’s coal-to-clean-energy policies fuel the surge of gas wall-mounted furnace market and heat pump water heater market, which gradually return to a reasonable level as the policy incentives weaken. In the post-coal-to-clean-energy time, enterprises start to develop targeted products for potential retail market and project market.

Many water heater enterprises, for example Haier, Rinnai and Vatti, have been devoted to improving their manufacturing capacity as well as service capability to meet the explosive demands for clean space-heating solutions.

This opportunity allows industry insiders to expect high for the future development of the industry amid the sluggishness this year.