China Household Electrical Appliance Association (CHEAA) released its annual analysis and forecast for the 3rd year in a row in January, 2015. China's economy has entered a new normal of slower growth amid the slow recovery of global economy and the adjustment and transformation of China's domestic market. Home appliance industry has seen the toughest year in history in the past 2014, with slow rise in sales of most appliances and negative growth in sales of refrigerators and washing machines.
Industry competitiveness enhanced compared to last year
China's massive economic stimulus policy ended in the year of 2013. As one of the sectors greatly benefiting from economic stimulus policy, China home appliance industry has grown through competition while actively pursued the opportunity of consumption upgrade. As a result, the industry's competitiveness and profitability have been notably enhanced.
It is estimated that industry-wide core operating income would register 13,000 Yuan, an increase between 14% to 15%, pre-tax profits 110 billion Yuan and total profits 73 billion Yuan, a rise more than 25% compared with 2013, according to Xu Dongsheng, Secretary General of CHEAA. The core driver behind the growth is technology innovation and enhanced profitability which comes from the former. In addition, lower prices of raw materials such as copper, aluminum and steel also plays a part in economic growth for it helps slash the cost of procurement. The export for 2013 is expected to reach 54.5 billion to 55 billion dollars with a rise between 8% to 9%.
It is estimated that annual production of major appliances would approach a historical high made in 2011, with production of refrigerators/freezers, and air conditioners reaching 89 million and 105 million units respectively, washing machines and microwave ovens 65 million and 69 million units respectively, and refrigeration compressors 245 million units with an increase of 5% to 8%.
Consumption upgrade and transformation in its model
Chinese consumers start to look at high-quality, stylish and energy-efficient mid to high-end products while China enters the stage of consumption upgrade. Inverter air conditioners, roller washing machines, side-by-side and multi-door high end refrigerators, large-size flat-panel TV and sophisticated kitchen appliances takes an increasingly larger market proportion.
With young people as main home appliance consumers, changes in their consumption model and habits could trigger channel reforms, in which the position of e-commerce has been strengthened with a surge in online sales. Mainstream industry players are going with the tide by making overall arrangements for online and in-store products after conducting water tests in the past two years. According to statistics proportion of online sales for major appliances has grown to 6% to 9%, while kitchen appliances and portable appliances secures even bigger proportion in 2013.
Industrial transformation and upgrade implemented
Home appliance industry has gone beyond ideas and starts to press ahead in a more down-to-earth manner. Most players, especially standard setters, have shifted their focus from the previously-highlighted scale and market share to technology innovation, management, design, quality, efficiency and quality enhancement.
By building a sound incentive mechanism, home appliance players attach great importance to technology investment, which consolidates the position of technical workers. This trend could be proved by the growing scale of CHEAA-hosted Technology Conference in the past two years. The 2013 technology conference, for instance, has brought together about 600 people.
Roadmap for China Home Appliance Industry, initiated by CHEAA, has been welcomed and recognized through the industry since its first release in 2011. In 2013, CHEAA launched the revision of roadmaps for refrigerators, washing machines and air conditioners, a move fully supported by mainstream industry players. At October 31, 2013, CHEAA officially released 2013 Roadmap for Refrigerator Industry, 2013 Roadmap for Home-use Washing Machine Industry, and 2013 Roadmap for Room Air Conditioner Industry. The revision thoroughly analyzed key technical barriers and bottlenecks faced by refrigerator, washing machine and room air conditioner industries, compared domestic industry with its overseas counterparts, and proposed a R&D direction. Furthermore, it went into details about industry goals and R&D demands, added a status quo analysis for year 2013, and revised goals for 2015 and 2020. With rich contents and more focused goals, these roadmaps are expected to cast light on technology innovation.
Home appliance players also values management. A number of them have implemented Industrial Engineering (IE) and lean manufacturing, which improved management and efficiency while reduced cost. Currently, 20% to 30% of all enterprises use IE to streamline processes and logistics, and reduce unnecessary cost on logistics inside the plant and power consumption. By well managing their delivery, they cut the cost on good handling. Moreover, they improves efficiency with less people, with enhanced manufacturing process and efficiency emerged from automatized production line.
Guide the consumption trend in coming 2014
With an increasing penetration rate, China home appliance industry enters the stage of consumption upgrading. For this reason, CHEAA plans to devote more to guide the consumption trend while enlighten the public on home appliances. The forthcoming Appliance & electronics Expo 2014 (AWE 2014) would be the first platform in 2014 to present the overall capacity and image of China home appliance industry. It is set to open at E4 to E7 exhibition halls in Shanghai New International Expo Centre (SNIEC) March 18 to 21 2014. Built on three years of experience, AWE 2014 has expanded its presence in home appliance industry with an exhibition area of 60000 square meters (including a newly leased exhibition hall). Industry players have been actively involved in AWE 2014, and 90% of the booths are booked out up till now. A special zone for environmental friendly and healthy home appliances draw even more attention.
The forecasts of CHEAA for 2014 are as follows: First, consumption is on an apparent trend of upgrading, which provides a boost for home appliance industry to grow at a steady pace, amid the overdraft consumption and stagnation of housing market. Secondly, though taking a large part of global market, home appliance exports has limited room to grow and the growth would be heavily dependent on market expansion and product structure adjustment. Thirdly, growth of home appliance industry would largely comes from industrial upgrade and the key to its sustainable development is technology innovation and management enhancement. Fourthly, online sales would present more market opportunities and challenges. The risks for 2014 mainly comes from uncertainty in domestic housing market and turbulence of global politics.
In all, China home appliance industry would continue to grow steadily. And it's our earnest hope that people concerned about home appliance industry would provide continuous support to advance the industry.