Has Chinese demand for home appliances peaked?This post was edited by senoritazhao at 2017-7-20 16:01
Jane Li / South China Morning PostFlat sales of fridges and TVs suggest demand for those products may have peaked, but the future’s bright for air conditioners, say analysts.
Chinese demand for traditional home appliances such as washing machines, refrigerators and televisions may have peaked, say analysts, pointing to the persistently flat or negative growth of those products in the past two years as evidence.
In the 1980s and 90s, ownership of those products symbolised a decent middle class life style, something to aspire to, and the sector began to blossom. But after three decades of breakneck economic growth, most of the mainland’s affluent households have already equipped themselves with sufficient home appliances.
I don’t care what new and exciting features home appliance producers roll out. I only consider purchasing products when my old products need to be replacedHELEN XIONG, CONSUMER
As a result, sales of home appliances have started to show signs of weakness in the past two years in China, and increased home sales have not seemed to help much, analysts say.
“The rebound in housing sales over the past 18 months or so has not given much of a boost to appliance demand,” wrote Ernan Cui from Hong Kong-based Gavekal Dragonomics, a global investment house, in a recent note.
“The broader point is that China’s market for both housing and major home appliances has matured and is shifting onto a different trajectory.”
The country of 1.3 billion people has transferred from a nation that provided planned residential housing in the 1980s to one resembling the western model, in which people can purchase and sell properties freely. The residential floor space thus increased from around 140 million square metres in 1998 to 790 million square metres in 2012, according to the China Real Estate Statistics Yearbook 1999-2013.
“There is a very weak relationship between housing sales volume and demand for home appliances,” said Horse Liu, an analyst at IHS Markit Technology’s home appliance intelligence service.
There is a very weak relationship between housing sales volume and demand for home appliancesHORSE LIU, ANALYST, IHS MARKIT TECHNOLOGY
Liu explained that as Chinese demand had mostly stemmed from the need to replace home appliances in recent years, the sector would see flat or negative growth for at least the next five years since the current demand for those products was largely met already.
“The replacement cycle for air conditioners is around eight to 10 years, while it is 10 to 15 years for televisions and washing machines,” he said.
Supporting his assessment, figures show housing sales volume grew 7 per cent in 2015 and 22 per cent in 2016, while refrigerator sales have declined every year since 2014, and sales of washing machines and televisions only managed 2 per cent growth, by volume, in 2016, according to Cui.
A beacon of light among the seemingly bleak figures might exist, in the form of relatively low-technology air conditioners, according to Cui.
The reason, he said, was that most air conditioners sold in China are wall- or window-mounted units that cover only a single room. So, installing multiple air conditioners is a reasonable thing to do as people’s incomes rise and their houses get more spacious.
“The humble air conditioner should still have a few good years left as households fit out larger apartments with more units,” Cui wrote.
Helen Xiong, a 29-year-old primary school teacher who recently bought a small apartment in a southwestern Chinese city, said she would only purchase home appliances when the old ones ceased to functioning.
“I don’t care what new and exciting features home appliance producers roll out,” she said, “I only consider purchasing products when my old products need to be replaced.”
She said she only bought an air conditioner for her new house, and used an old refrigerator fetched from her parents’s home.
“I don’t think people have much need for new home appliances nowadays,” she said. “I’d rather save the money for some smart devices.”
In the face of such a challenge, Cui and Liu both suggested appliance manufacturers try to upgrade and diversify their products.
“The online marketplace has already become a very fierce battle ground for brands, and the countryside is no easy place to peddle products either,” said Liu. “Now home appliance manufacturers could rely more on upgrading their products and raising the prices.”
Cui cited Chinese air conditioning specialists Midea and Gree as examples of firms who have branched out into new areas. Midea bought German robotics company Kuka AG, while Gree has started selling smartphones and developing electric vehicles in recent years as part of their strategy to boost profits.
“The size of the domestic market is pretty well established and this has pushed appliance makers to pursue growth by other strategies,” Cui wrote.
This post was edited by Jaaja at 2017-7-20 17:39
Actually I see bright (well at least steady) future for home appliance market, but quite elsewhere.
I forecast that in a decade or two, more and more Chinese will start to leave the cities, and after years of working in cities, look for fresh start with new kind of rural life back in their home towns.
This applies especially to those who did not make quite enough to purchase property in cities, or otherwise were unable or uninterested to transfer their hukous to city.
They will be volutarily escaping pollution and hustle of the cities, or be laid off from factories, but also just go back to take over their family farms from aging parents or grandparents. Remote working in certain professions could also be supported by state.
These returning igrants will upgrade both housing and appliances in their rural homes, with their city-made fortunes.
China can only go so far by urbanization by relocation - eventually urbanizing people and their environment where they are should be the key strategy. Upgrade roads, schools, hospitals, and go from there. Soon enough you won't need to limit people from moving to cities, they will do it volutarily.
senoritazhao Post time: 2017-7-20 16:11 static/image/common/back.gif
The reason, he said, was that most air conditioners sold in China are wall- or window-mounted units ...
Some time back, there was trade in value for old electrical appliances. Seems that the policy did not work. Today, like US, China is becomming a THROW AWAY SOCIETY. Soon there could be no space for that! Air-Purifier might be next Top-Seller
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