The year 2016 has witnessed a disparity between domestic sales and exports in China’s refrigerator industry, with the former on a continuing downward trend, and the latter on a stable upward trend.
Export volume climbed while unit price slid
Statistics from General Administration of Customs of P.R.C. suggest that, in the first nine months of 2016, China’s refrigerator industry has seen an export volume of 24.22 million units, a year-on-year increase of 8.2%. And the monthly fluctuation in exports roughly stays in line with the performance of last few years: a slide occurred in February affected by China’s Spring Festival; a pickup of 33.5% increase was seen in export volume in March, a month marking the end of China’s biggest traditional festival; export volume peaked in May with 3.28 million units after months of continued increase; a slight slide was noticed after May. In general, refrigerator industry has maintained a two-digit monthly increase in export volume year-on-year in the first nine months of 2016 except for July.
But the surge in export volume doesn’t necessarily signal booming exports. If you look at the export value in the first nine months of 2016, you could see a 0.5% drop.
Refrigerator unit price in exports has fallen by at least 5% year-on-year for most months of 2016 with very few exceptions. In the first eight months of 2016, the average unit price in exports of refrigerators plunged by 8.5%. Taken exchange rate changes into consideration, we come to the same conclusion: unit price is going down. And it’s safe to conclude that low unit price contributes to high export volume in China’s refrigerator industry. But this situation might change over time if raw material prices pick up.
A year-on-year increase in export volume to major continents
As China’s biggest export market of refrigerators, Europe accounts for approximately one thirds of China’s refrigerator exports by both export value and volume. America, the second largest export market by export volume, falls behind Asia by export value by two percentages, indicating that Asia has a relatively more optimized product mix than America.
Unit price in exports to these continents fell largely due to RMB devaluation. The biggest unit price drop comes from Africa, a continent under pressure from geopolitical conflicts, political divides, terrorism, epidemic diseases, refugees, etc.
By country, the U.S. is traditionally the largest export market of China’s refrigerator industry, with its export volume and export value both accounting for 20.6% of total in year 2016, almost the sum of those of Japan, Germany, France, and U.K., which are traditionally the second-largest markets. Previously, the U.S. market has been dominated by R134a-based products, which posed a negative impact on China’s refrigerator exports (featuring R600a-based products) to some degree. In recent years, promotion of R600a-based products in the U.S. has been fruitful. As a result, many Chinese refrigerator makers capitalize on this opportunity to expand their presence in the U.S. market. While EPA bans a host of high GWP refrigerants including R134a in certain new products from as early as January 1, 2021, China’s refrigerator industry is expected to see an increase in exports to the U.S.
Home-grown brands outperformed foreign brands by export volume
Single-cooling compact refrigerators account for almost half of China’s exports of refrigerators, and those with a capacity fewer than 150L are especially popular in international markets for their high cost effectiveness. In the first nine months of 2016, home-use compact refrigerators with a capacity between 50L to 150L came top by export volume, accounting for 31.6%. Freezer refrigerators with a capacity between 200L to 500L came second by export volume, accounting for 20.9% and came first by export value, accounting for 31%.
By brand, home-grown brands outperformed foreign brands by export volume. Out of all foreign brands, only LG made the top 10 list by export volume, ranking 7. But in terms of export value, four foreign brands, LG, Toshiba, Samsung and Daewoo, made the top 10 list. Foreign brands have a more high-end product mix compared to Chinese brands.
Statistics from General Administration of Customs of P.R.C. suggest that, in the first nine months of 2016, Homa, Midea and Kelon of Hisense ranked top 3 by export volume, accounting for 16%, 12.3% and 11.6% respectively, a year-on-year growth of 4.7%, 37.8%, and 3.3% respectively. Among the top 10 exporters by volume, Midea and Meling both saw an increase of more than 35% in export volume and an increase of more than 10% in export value, while Samsung and LG both saw a relatively big drop by volume and value. In terms of unit price, top 10 exporters by value saw a drop in unit price in general, except for Haier and Daewoo, who saw an increase of 8.8% and 6.3% year-on-year.
China’s home-grown makers registered an export volume of approximately 25 million units, most of which (except for some products from Haier, Midea, Kelon of Hisense, and a few other enterprises) are OEM products. Statistics from China iol.com suggest that, exports of China’s self-developed brands registered less than 2 million units. Together with those manufactured in overseas facilities, products sold internationally bearing China’s self-developed brands together are less than 5 million units every year. Chinese brands are far less recognized than European and the U.S brands such as Whirlpool, Electrolux, Bosch, and South Korean and Japanese brands, such as LG, Samsung.
In 2016, some Chinese home appliance giants expanded their international presence through mergers and acquisitions. In the first half of 2016, Midea bought white goods segment of Toshiba, German robot maker Kuka, and 80% of shares of Clivet. Meling’s newly built Pakistani base and Haier’s newly built Russian base have come on stream. Meling’s Indonesian facility is currently under construction. Kelong of Hisense and TCL both have their plans for mergers and acquisitions. Moving forward, more Chinese industry players are positioned to go global.