Home appliance market is cooling from Jan to July 2022. The flare-ups of COVID-19 take a toll on consumption and logistics, leading to a slower growth of disposable income, dented spending confidence and willingness, and therefore a weak domestic consumption market. Export wise, there has been a decline in overseas orders due to high inflation in Europe and the U.S., the weak growth of demand, and the resumption of overseas production bases, and the high base of last year.
China’s home appliance industry posted revenue of 1008.08 billion Yuan from Jan to July 2022, up 3.9% YoY, and profit 69.37 billion Yuan, up 19% YoY. The pullback of raw material prices this year eases the cost pressure of home appliance enterprises and contributes to a recovery of profit.
Affected by COVID-19, categories such as refrigerators and air conditioners fell slightly in output. For portable appliances, some fast-growing categories of last year such as vacuum cleaners and electric ovens and grills saw a clear drop in output. For kitchen appliances, only gas ranges kept a growth in output.
The COVID-19 led to weak domestic demand for home appliances and thus a shrinkage of market size. The retail sales value of home appliances in the domestic market stood at 396.4 billion Yuan from Jan to July 2022, down 7.7% YoY, according to All View Cloud.
By category, the white good market saw an overall sales fall of air conditioners, refrigerators and washing machines in both value and volume. Kitchen appliance market saw an overall sales fall of range hoods, gas ranges, electric water heaters and gas water heaters in both value and volume, and a rise in emerging categories including dishwashers in both value and volume. Portable appliance market is lackluster. It’s worth noting that emerging categories such as dryers and integrated stoves achieved good performance in H1 2022 despite the overall sluggishness of the home appliance market.
The drop of home appliance sales at offline market is bigger than that at online market.
Under the influence of factors including the flare-ups of COVID-19, the Russia-Ukraine conflict, high inflation, and the slow growth of demand, the global economic growth slowed markedly in 2022. From January to July 2022, the export value of home appliances from China stood at 60.12 billion USD, up 0.6% YoY.
Large appliances including refrigerators, air conditioners, freezers, and washing machines fell in export volume. Many categories of portable appliances kept the fall in both export value and volume that started from H2 2022 except for personal care appliances and clothes care appliances. The export of components has been going up since Q3 2020.
The export performance differed when it comes to regions and countries with export to the EU, Japan, the BRICs and North Africa going down by export value, and export to the US, ASEAN countries and West Asia going up. Export to the BRICs and West Asia/North Africa reported positive growth.
Outlook for Q4
The repeated flare-ups of COVID-19 since March particularly the outbreaks in Shanghai and Shenzhen from March to May took a toll on the recovery of domestic economy, causing pent-up consumption, hurdled logistics, and low packing efficiency of key ports, and therefore a fall of home appliance consumption from Jan to Aug even during the June 18 shopping festival.
Given the slow growth of traditional home appliance categories and the weaker impact of real estate cycle on home appliance industry, the industry is mainly driven by replacement demands instead of new demands. With barely growing resident income, dented spending confidence and the weak demands for home appliances particularly traditional categories amid the COVID-19, it is very much dependent on the development of the pandemic and the corresponding prevention and control measures for the yearly performance to return to the level of 2021. After three years of weak consumption, enterprises’ confidence is dented. Even the leading players decide to cut down on the non-core business to survive.
As to overseas market, the ultra-loose monetary and fiscal policy adopted by developed countries including the US in 2021, the accelerated risks of global inflation, the high inventory of home appliances at the retailers based in Europe and the US, and the global energy crunch caused by the Russia-Ukraine conflict has made an economic impact from sectoral inflation to many areas of people’s basic livelihood including petroleum, electricity and food, putting global economy under the risk of stagflation. This, coupled with a decline of overseas orders as overseas factories resume production along with global economic recovery, is expected to affect the number of overseas orders and therefore cause a high probability of decline in yearly export of home appliances from China considering the high base of last year.