Source: CHEAA
Overview
Faced with pressing challenges including weak domestic demands, skyrocketing raw material prices and international shipping costs, the supply chain disorder, the Yuan appreciation and the fallout of Covid-19 last year, China’s home appliance industry rose to difficulties and forged ahead with strong resilience, making a sharp growth of annual revenue, of which export value touched the 100 billion USD milestone. But the soaring raw material prices dragged the industry’s profit.
The annual revenue of China’s home appliance industry came to 1.73 trillion Yuan in 2021, up 15.5% YoY, and profit 121.8 billion Yuan, up 4.5% YoY. The profit growth was far slower than the revenue growth.
When it comes to the overall output of 2021, Q1 kept the fast-growing momentum of H2 2020. Some categories including refrigerators and air conditioners slowed down in output growth starting from April. Entering Q3, some categories including refrigerators, freezers and vacuum cleaners that saw a big jump in overseas orders in 2020 slid in output YoY due to a fall of overseas orders and the high base formed for the same period 2020. Of big appliances, categories including air conditioners, freezers and washing machines achieved a growth YoY in output in 2021; of portable appliances, categories including vacuum cleaners, electric ovens and grills and microwave ovens that have a big share of overseas orders achieved a growth YoY in output in 2021.
Domestic market
China’s home appliance industry saw a rebound in domestic retail sales in 2021, but the growth took a sharp slowdown starting April. Data from All View Cloud show that, domestic retail sales value of home appliances reached 760.3 billion Yuan in 2021, up 3.6% YoY and down 7.4% compared to 2019. For December alone, domestic retail sales value fell 10.4% YoY.
Category wise, domestic sales of air conditioners, refrigerators, washing machines and kitchen appliances rebounded in Q1. This, coupled with the low base of same period 2020, led to a growth of more than 40% in sales volume of these categories. Entering April, the sales volume growth of air conditioners, refrigerators and washing machines slowed down and the growth remained weak throughout the year. But it’s worth noting that emerging categories such as tumble dryers and vacuum cleaning appliances maintained big percentage jumps in economic recovery and became one of the main growth drivers of the industry.
Under the impact of the pandemic, online sales took a bigger share of the market in 2021 with social media and live streaming platforms rising to be key marketing channels of the industry aside from traditional e-commerce platforms. In 2020, most home appliances suffered a fall in omnichannel retail sales value, but key products saw online sales stronger than sales from brick-and-mortar stores. As home appliance consumption gradually recovered in 2021, online home appliance market posted strong sales performance with a growth rate faster than offline market. Data from All View Cloud show that, retail sales value of home appliances from online market reached 388.9 billion Yuan, accounting for more than 50% of the market, while that of offline market 371.4 billion Yuan. The regular pandemic prevention and control led to the formation of a new retail sales pattern with offline sales as a supplement to online sales. It’s worth noting that, even for large appliances that needs home installation such as air conditioners and storage water heaters, online market has taken around 50% of the market share.
Export
The export performance of China’s home appliance industry for 2021 kept the strong growing momentum of H2 2020. Export value of home appliances from China hit the 100 billion USD milestone at 104.4 billion USD, up 24.7% YoY.
While the export performance reached an all-time high, the growth rate of it has been declining on a month-over-month basis as a result of the following factors: (1) the strong growth made in H2 2020 that formed a high base for growth; (2) restraints on the supply end such as power rationing, production limitation and the high cost of international shipping; (3) the fixing of broken overseas supply chains; (4) declining global fiscal support to ease the influence of COVID-19. Excluding the influence of the high base factor, the growth rate was 43.4% compared to 2019.
In 2021, large appliances and portable appliances slowed down in both export value and volume starting Q2 under the influence of growing raw material cost, and the growing trend of both value and volume that had lasted for a year was broken since July. Plus, it’s worth noting that the growth rate of export value was always higher than that of export volume both for large appliances and portable appliances in 2021 due to a price rise out of cost pressure. All categories of large appliances achieved a growth in both value and volume but differed in monthly performance affected by the overall price rise. As to portable appliances, categories under portable appliances differed in monthly performance starting June after a strong overall growth since July 2020.
When it comes to regions, China’s home appliance export to most countries and regions posted a double-digit growth though the growth rate slowed down, of which export to the EU grew fast, export to the US and Japan grew slightly and export to Australia and Canada fell. Export to Emerging and developing economies differed by country.
Outlook
China’s annual Central Economic Work Conference 2021 cautioned that, China’s economic development is facing pressure from demand contraction, supply shocks and weakening expectations. Home appliance industry is no exception. In early 2022, outbreaks of sporadic cases, weak domestic demands, complicated international situation and the rise of international commodity price dealt a blow on home appliance industry. To cushion the impact, National Development and Reform Commission, Ministry of Industry and Information Technology and Ministry of Commerce rolled out policies to stabilize economy and promote consumption, but the effect of them remain to be seen.
China’s containment of Covid-19 has achieved some results, but sporadic outbreaks of scattered infections still affected domestic economic recovery and led to weak domestic demands, logistics hurdles and the low efficiency of container port operations. This, coupled with the weak growth of existing categories and the weakening real estate cycle, means the market demand mainly lies in the replacement of existing products which is believed to be weak (particularly for traditional categories of appliances) amid the pandemic and whether it can come back to the level of 2019 depends very much on the pandemic prevention and control.
At the same time, emerging categories such as tumble dryers, dishwashers and wet dry vacuum cleaners expand fast to meet rising market demands. We notice that some new popular portable appliances of emerging categories only enjoyed fast expansion for 1-2 years, and after that, were faced with intense competition. We believe this stays true in 2022. For home appliances, promotional campaign might be productive in the short term, but it is not a strategy for the long term. We believe tech-driven iteration of products and consumers’ confidence in brands are more important in long-term competition. Plus, we believe that there still are potential demands to be tapped and the market will be further divided with new categories, high-end products, scenario-based designs, refined product mix, consumer-orientation and lower-tier markets will be the key areas of focus for home appliance industry.
While the demand side of overseas markets recovered faster than the supply side in 2021, domestic market was the opposite due to the strong resilience of its supply chain. In this context, most export-oriented enterprises received a great deal of orders in 2021. But the intensified competition and international logistics hurdles exacerbated the trading environment, leaving enterprises little to earn.
Entering 2022, the global inflation coupled with the global energy shortage caused by the Russia-Ukraine war has made an impact on many fields of our daily life including oil, power and food. The global economy is facing an increased risk of stagnation.
WHO has struck a hopeful note in December 2021 about beating the pandemic as of the end of 2022. Given the low fatality rate of Omicron, we tend to think that the pandemic will be gradually contained in 2022 if there are no more emergence of new variants, and developed countries will see a faster rebound of economy than emerging economic entities and low-income countries due to its higher rates of vaccination as the fallout of the pandemic eases. The global economy is expected to slow down in growth after a strong rebound in 2021.
Global growth is expected to decelerate markedly in 2022, from 5.5% to 4.1%, according to the World Bank. This is expected to lead to a fall in the volume of traded goods. Amid the high inflation expectations, slow economic recovery, the energy shortage and the high operation pressure faced by enterprises, China’s fast export growth is expected to slow down.