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  • Research Report on Air Conditioner Industry & Market of China
    Order ID:  CDC-R-2002-005
    ISBN:  2002 Edition
    Publisher:  All China Marketing Research Co., Ltd.
    Publication Date:  11/1/2002 12:00:00 AM
    Format:  Paper Copy
    Languages:  English
    Pages:  270+
    Price:  $1000 (for academic users)
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    Delivery:  Airmail
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    Abstract China witnessed its initial production of those household air-conditioners in the year 1978 when no more than 223 air-conditioners of this type were manufactured. However, restricted by the capacity of production and development as well as the industrial policies of China, the total production in 1980 remained less than 20 thousand. In 1990’s, especially during the recent years, the industry of household air conditioners has undergone such a dramatic expansion that the total production soared to 0.22 million in 1990, to 18.2667 million in 2000 and to 23.1288 million in 2001, during which the annual increase has remained above 20%. Currently, the production capacity of China’s household air-conditioner industry has reached 26 million to 33 million (double-shift level). The products have also grown in their type from the pure window-type air-conditioners to split air conditioners, floor-standing air conditioners, central household air conditioners and others. Today, the production of air conditioners in China has approximated one third of the global total and China has ensured a worthy title as the air-conditioner manufacturing giant. In the past four years, both the gross industrial output and the sales income of China’s air-conditioner industry have experienced an uninterrupted development and growth. The most prominent rise has happened to the two consecutive years---2000 and 2001, in which the gross industrial output and sales income in 2000 expanded by 29.3 and 28.7% respectively compared to 1999, and the gross industrial output and sales income in 2001 jumped by 53.7% and 60.5% separately compared to 2000. The tremendous increase enjoyed by the air-conditioner industry in 2001 can be attributable mainly to an expansion in the manufacturing volume of this industry as a whole. Within no more than one year, all the state-owned enterprises of this industry as well as the enterprises of other categories with an annual sales income of more than RMB2 million have rocketed up from 195 in 2000 to 248 in 2001, 27.2% up. Of these air-conditioners manufacturers, the large and medium-sized enterprises have risen in number from 56 in 2000 to 75 in 2001, 34% up. In the meantime, those foreign-funded enterprises have expanded in number from 78 to 94, 20.5% up. Given the geographical distribution of all these 248 enterprises, most of the air-conditioner producers are found in Guangdong Province and East China, and the new enterprises are chiefly concentrated on Guangdong, Zhejiang and Jiangsu. In the year 2001, since OEM suppliers of the joint ventures claimed an increase in their volume of production and sales, their concentration of production dropped to some degree. Of all the air-conditioner manufacturers, those top five enterprises shrank in percentage from 52.5% in 2000 to 49% in 2001. Meanwhile, the air-conditioners of three major brands—Haier, Midea and Gree fell in their production from 39% to 37%. Over half of the total export of air conditioners was secured by the production bases that have been established in China by those multinationals. In recent years, there has been a continuous drop in the amount of financial loss confronted by those deficit enterprises of the air-conditioner industry. Their total loss ever climbed up to a pinnacle of RMB 1.208billion in 1998, but plummeted to RMB 0.352 billion in 1999 and dropped again to RMB 0.295billion in 2001. 1999 is viewed as a period of enormous magnitude by the air-conditioner industry of China since it is in this year that the industry as a whole turned loss into gain. The total profits of this industry in 2000 and 2001 claimed a rise of 25.8% and 51.4% over the previous year separately. China’s air-conditioner industry encountered a cool summer in 2001 and as a result, lots of the enterprises failed to meet their sales target and had to confront the huge overstocking. The sales volume of air conditioners in Chinese market totaled 14.8 million in 2001, a rise of 41% compared to the previous year; however, the overstocked products amounted to 7.2 million. In the first half of 2002, the factory and floating stocks of the air-conditioner industry of China have amounted to more than 10 million, a tremendous stock never seen in this industry before. In other words, the air-conditioner industry is faced with a harsh situation of supply over demand. The data released by State Statistics Bureau show that an evident rise can be spotted in the possession volume of the air conditioners for every 100 urban households. In 2001, the possession volume of air conditioners for every 100 urban families was 35.7 units. A large gap happens to different regions on the possession volume, in which Guangdong tops the list, second come Shanghai, Beijing and Chongqing. Given the regional markets, the air conditioners are mainly sold in the regions such as East China, Middle South and North China. At present, East China enjoys the largest numbers of air conditioners with an average ownership as much as 52.5% while the smallest number of air conditioners are secured by Northeast China with an average ownership of 3.7%. Since the market of Northeast and Northwest China is featured by a quite cool climate and the low incomes of local residents, it will never play a major role in the sales of air conditioners. Coupled by the ceaseless expansion of our domestic market, the export of Chinese air conditioners has never desisted from a continual increase at a large rate annually. The export volume of air conditioners totaled 2.017 million in 1999, 3.87 million in 2000 and 6.502 million in 2001,whose export volume saw a rise of 68% and even 2.2 times over 2000 and 1999 separately. The export value rose up to $ 0.4848 billion in 1999, $0.7971 billion in 2000 and $1.129 billion in 2001 whose export value experienced a jump of 41.6% and even 1.33 times over 2000 and 1999 respectively. The export value of air conditioners has been witnessing an ever-increasing share of the total export value of those household appliances. In the first half of 2002, the export volume of air conditioners of China has amounted to 5.5 million, an increase of 38% compared to the corresponding period of last year. Nevertheless, in this export rush, the export volume of those domestic air-conditioner manufacturers has expanded by 10% during this period when compared to the same period of last year. Yet, such a steep rise is mainly contributed by those foreign-invested enterprises in that their export volume during this period has claimed a percentage as much as 58% in the total. There has come a corresponding rise in the demand for import while the domestic market has an inflated demand for the air conditioners. The demand for import reached its summit in 1999 and experienced a gradual decline since then. The import value of the air conditioners rose by 75% in 1999 when compared to 1998,but dropped by 5.5% in 2000 when compared to 1999. The import value totaled $0.1278 billion in 2001, no tangible change in contrast to the previous year. It’s estimated that the recent years to come won’t see any huge variation in the air-conditioner import of China. Since 2001, the air-conditioner war of an ever-expanding volume has extended to the industry of air-conditioning compressors. The air-conditioning compressors boasted of a output volume of 20.76 million units in 2001, 58% up over the previous year, and a sales volume of 18.84 million and a year-end stock of 2.2 million units, 3.7 times in comparison with the year before. In recent years, the balance of supply and demand has been disturbed; consequently, the price of compressor market has failed to cease its uninterrupted descent from RMB 1600 for each unit in 1995 to some RMB 1000 now. The output volume of air-conditioning compressors is expected to reach 27 million to 28 million units in the year 2002; that is, oversupply has been destined to happen. It’s anticipated that after China’s air-conditioner market gets into a phase of stability, the domestic capacity will come close to 20 million units, in which the international market is to account for 6 million to 8 million units. The production of China’s air-conditioner industry on a whole stood above 23 million units in 2001 and is expected to approximate 24.5 million units in 2002, nearing 26 million units in no time. In the several years to come, as those urban inhabitants have enjoyed the increased incomes and an improved living condition, and much energy has been poured into development of the international market as well as the new household air-conditioners, China’s air-conditioner industry will move forward at an annual rate of 10% or so in the few years to come. In addition, because the whole industry will get into a phase of steady development by degree, its profits will shrink accordingly and a period of meager profit is likely to come into existence in the next three to five years. This report, based on a combined method of qualitative and quantitative analyses, performs an objective study of those factors involved in China’s air-conditioner industry such as its status quo, market volume, chief brands, market share, market segmentation as well as industrial policies, and also presents a scientific estimation of the future market demand and developmental trend. This report will help the people both inside and outside this industry to have a deeper interpretation of China’s air-conditioner industry and market and to pay more attention to the development of this market; meanwhile, this report may serve as a reference material for those who intend to participate in the business of China’s air-conditioner market. Research Methodology This report is developed by Department of Industrial Research of All China Marketing Research Co., Ltd. All China Marketing Research Co., Ltd. depends on the abundant Source in the national statistic system, takes advantage of five subsidiaries, one joint-funded subsidiary and forty agencies across the country to conduct an effective assembly and arrangement of the materials, and also maintains a long-term cooperation with all the domestic and foreign industrial associations as well as some reputable corporations. Therefore, the data in this report are able to function as an objective record of the basic condition in this industry. When this report is written, the author consults the relevant documents like Room Air Conditioners, Specification for Installing Room Air Conditioners, China Statistics Yearbook, China Light Industry Yearbook, and etc. Besides, this report has gained the support and cooperation from such research institutions as Sinobnet, Horizon-China, Development and Research Center of State Council, Monitoring Center of Economic Prosperity of China and the same. Resources of the Database Information of All China Marketing Research Company Ltd (ACMR) ACMR has an exclusive commercial database developed under the authorization of State Statistics Bureau, offering a great amount of second-hand statistics and samples for industry and market research. The database include: ? Name List Database of Enterprises in China (renewed annually): in collection of basic information of over 4.5 million enterprises ? China’s Industry Database (renewed monthly / annually): covering over 560 industries ? Custom Import & Export Statistics Database (renewed monthly): covering the import & export statistics of over 9,000 kinds of products ? Macro Economy Database (renewed monthly / annually): covering database of consecutively ten years, offering over ten thousand pieces of statistical data each month The statistics are based on state-owned and other non state-owned enterprises that have an annual sales income of over RMB 5 million.
    Table of Contents:  
    Contents 1. Status of Industry....... 1 1.1. Overall Status of Industry..... 1 1.1.1. Summary of Industrial Development 1 1.1.2. Production and Sales 2 1.1.3. Geographic Distribution of Output 3 1.1.4. Concentration Level of the Industry 7 1.1.5. Investment 8 1.1.6. Economic Performance Analysis 9 1.1.7. Product Mix 11 1.1.8. Status of Product Quality 12 1.1.9. Major Problems Confronted by China’s Air-conditioner industry 13 1.2. Status of Enterprises 15 1.2.1. Total Number and Geographic Distribution 15 1.2.2. Ownership Division of Enterprises 16 1.2.3. Distribution of Output by Ownership of Enterprises 17 1.2.4. Grouping Analysis of Enterprises Divided by Ownership 18 1.2.5. Grouping Analysis of the Enterprises Divided by Sales Revenue 21 1.2.6. Status of Major Enterprises 24 2. Status of Market...... 38 2.1. Market Size... 38 2.2. Comparison between Production and Sales 40 2.3. Possession of Air Conditioners 40 2.4. Market Segmentation 41 2.4.1. Product Categorization 41 2.4.2. Market Segmentation by Product Models 42 2.4.3. Differences between Regional Markets 43 2.5. Market Share of Major Brands 46 2.6. Concentration of Brands 46 2.7. Competition 47 2.7.1. Brand Competition 47 2.7.2. Price Competition 58 2.8. Seasonal Features of Retailing.. 61 2.9. Distribution Channel... 62 2.9.1. Major Distribution Channels 62 2.9.2. Shares of Distribution Channels in Air Conditioner Market 64 2.9.3. Major Wholesalers 65 2.10. Marketing Strategies of major brands 66 2.10.1. Distribution Channels 66 2.10.2. Advertisement 82 2.10.3. Service 91 2.10.4. Corporation Identity 93 2.11. Views of Consumers toward Air-Conditioner Market 93 2.11.1. Comment of Consumers on Current Price of Air-Conditioner Market 94 2.11.2. Acceptance of Consumers toward Air-Conditioner Pricing Principle 95 2.11.3. Views of Consumers toward Competitiveness of Air Conditioner Enterprises 96 2.12. Chronology of China’s air-conditioner Industry and Market from 2001 to 2002 ... 98 3. Import and Export 100 3.1. Status of Export 100 3.1.1. Statistics of China’s Air-Conditioner Export in 2001 100 3.1.2. Main Destinations of Exported Products 102 3.1.3. Proportion of Exported Air Conditioners of Various Types 103 3.1.4. Status of International Air-Conditioner Market 104 3.1.5. Prospect of Air-Conditioner Export of China 105 3.2. Status of Import 107 3.2.1. Statistics of China’s Air-Conditioner Import in 2001 107 3.2.2. Main Country and Regions of Origin of Imported Air Conditioners of China 108 3.2.3. Proportion of Imported Air Conditioners of Various Types 108 4. Status of Parts & Conponets Supply of China’s Air-Conditioner Industry.... ......... 110 4.1. Status of Parts & Conponets Supply 110 4.2. Status of Air-Conditioner Compressor Industry and Market 110 4.2.1. Status Quo of Compressor Market of Air Conditioners 110 4.2.2. Major Suppliers of Air-Conditioner Compressors 113 4.2.3. Status of Major Air-Conditioner Compressor Manufacturers 116 5. Prospect of Future Development and Impact of China’s Accession to WTO.............. ......... 118 5.1. Prospect of Market Development 118 5.1.1. Market Development Potential 118 5.1.2. Estimation of Future Market 119 5.1.3. Forecast of Future Development Tendency 120 5.2. “Five-Year Plan” of Air Conditioner Industry. 121 5.3. Impact of China’s WTO Entry on China’s Air-conditioner Industry 121 5.3.1. Opportunities 122 5.3.2. Challenges 122 5.3.3. Investment or Market Opportunities 124 6. Industrial Policies.... 126 7. Company Profiles of Major Players in China’s Air-Conditioner Industry 127 7.1. Guangdong Midea Group Co., Ltd. 127 7.1.1. Basic Information of Company 127 7.1.2. General Introduction of Company 127 7.1.3. Concept and Target of Operation 128 7.1.4. Nationwide Network 128 7.1.5. Product Mix 132 7.1.6. Sales Performance 132 7.1.7. Status of Competition 133 7.1.8. Latest Dynamics 135 7.2. Haier Group Corporation 137 7.3. Zhuhai Gree Electric Co., Ltd. 143 7.4. Guangdong Kelon Electrical Appliances Co., Ltd. 150 7.5. LG Electronics (Tianjin) Appliances Co., Ltd. 155 7.6. Shanghai Hitachi Electrical Appliances Co., Ltd. 159 7.7. Guangdong Chigo Air Conditioner Co., Ltd. 164 7.8. Shanghai Sharp Electric Appliances Co., Ltd. 169 7.9. Ningbo Sanxing Group Co., Ltd. 172 7.10. Fujitsu General (Shanghai) Co., Ltd. 178 7.11. National Wanbao (Guangzhou) Compressor Co., Ltd. 182 7.12. Mitsubishi Electric · Shangling Air Conditioner Electric Co., Ltd.. 185 7.13. Sichuan Changhong Electric Group Co., Ltd. 194 Appendix 1 Retail Volmue and Value, Market Share and Price of Major air-conditioner Brands from 2001 to 2002..... 199 1. June, 2001. 199 2. July, 2001. 200 3. August, 2001. 203 4. Setptember, 2001 206 5. March, 2002. 209 6. April, 2002. 223 7. May, 2002. 238 Appendix 2 Chinese Home Appliances Enterprises with Sales Revenue over RMB 1 billion in 2000..... 253 Appendix 3 “GB17790-1999 Installation Standard for Room Air Conditioner”............. 254 Appendix 4 Inspection-relived Air Conditioner Products and Their Manufacturers in 2000............. 256 Tables Page Table 1 Top 10 enterprises with the largest sales revenue of air-conditioner industry in 2001... 24 Table 2 Main enterprises concerning with LG Group. 33 Table 3 Top 10 cities of the largest sales revenue of China’s air-conditioner industry in 2001... 44 Table 4 Most preferred brands of consumers........... 56 Table 5 Determinants of air-conditioner selection of consumers........... 57 Table 6 Shares of major distribution channels in air conditioner market........... 64 Table 7 Shares of major distribution channels in each region.. 65 Table 8 Major wholesalers of China’s air-conditioner industry 65 Table 9 Obligations between manufacturers and distributors under various modes of distribution......... 78 Table 10 Comparison of price under different modes of distribution (unit: RMB). 80 Table 11 Comparison of profit-making ability by manufacturers and distributors under different distribution modes........... 81 Table 12 Relationship between responsibility and benefit of channel member........... 81 Table 13 Comprehensive comparisons of various modes. 82 Table 14 Analysis of adaptability of various modes. 82 Table 15 Two-dimensional advertising investments of major air conditioner brands in 2000 to 2001... 85 Table 16 Output and sales volume of compressors of Shanghai Hitachi from 1994 to 2001......... 114 Table 17 Possetion ratio and saturation rate of household air conditioner........ 119 Table 18 Networks of Sales Centers of Midea 129 Table 19 Nationwide Service Network of Haier Group Corporation..... 138 Table 20 Networks of Gree Offices......... 144 Table 21 Service Networks of Kelon......... 152 Table 22 Sales Networks—Branch Companies of LG......... 156 Table 23 Networks of Branches of Ningbo Sanxing......... 174 Table 24 Networks of Distributors of Shanghai Mitsubishi......... 187 Figures Page Figure 1 Output value and sales revenue of China’s air-conditioner industry from 1998 to 2001. 2 Figure 2 Geographic distribution of output value of China’s air-conditioner industry in 2001..... 4 Figure 3 Concentration level of China’s air-conditioner industry. 7 Figure 4 Composition of newly built air conditioner manufacturers....... 8 Figure 5 Comparison between total profit and total loss of deficit enterprises of China’s air-conditioner industry from 1998 to 2001. 9 Figure 6 Profit margin on sales of China’s air-conditioner industry from 1998 to 2001 10 Figure 7 Sales revenue per capita of China’s air-conditioner industry from 1998 to 2001 11 Figure 8 Up standard rate on selective examination in past years... 13 Figure 9 Geographic distribution of air-conditioner manufacturers in China in 2001... 16 Figure 10 Percentage of Different-Ownership Enterprises of China’s air-conditioner industry in 2001... 17 Figure 11 Distribution of air conditioner output by ownership of enterprises......... 18 Figure 12 Proportion of sales revenue of ownership-divided enterprises in China’s air-conditioner industry in 2001... 19 Figure 13 Total profit per capita of ownership-divided enterprises in China’s air-conditioner industry in 2001... 20 Figure 14 Return on total asunits of ownership-divided enterprises in China’s air-conditioner industry in 2001... 21 Figure 15 Total profit of enterprises grouped by sales revenue in China’s air-conditioner industry in 2001... 22 Figure 16 Return on total asunits of enterprises grouped by sales revenue in China’s air-conditioner industry in 2001... 23 Figure 17 Weight in numbers of profitable and deficit enterprises grouped by sales revenue in China’s air-conditioner industry in 2001... 23 Figure 18 Output and sales volume of air conditioners in China from 1995 to 2001 39 Figure 19 Growth rates of output volume and sales volume of air conditioner in past years... 40 Figure 20 Possession volume of air conditioner for every 100 Chinese households from 1997 and 2000... 41 Figure 21 Market shares of different types of household use air conditioners in 2000........... 42 Figure 22 Possession ratio of air conditioners for different regions of China in 2001... 43 Figure 23 Possession ratio of air conditioner in regional markets 45 Figure 24 Market share of major brands in 2001... 46 Figure 25 Selection of air-conditioner models by potential consumers........... 55 Figure 26 Monthly retailing volume in air conditioner market in 1999 and 2000........... 61 Figure 27 Comparison of monthly Two-Dimensional Advertising investment of China’s air-conditioner industry in 2001 and 2002... 89 Figure 28 Proportion of promotion methods of air-conditioner brands in the first quarter of 2002... 90 Figure 29 Comment of consumers on current price of air-conditioner market 94 Figure 30 Acceptable price ranges of consumers........... 95 Figure 31 Acceptable pricing principle of consumers........... 96 Figure 32 Acceptable resources of enterprise competitiveness of consumers........... 97 Figure 33 China’s export volume and value of air conditioner from 1998 to 2001. 101 Figure 34 Main country and regions of destination for exported air conditioners of China 102 Figure 35 Proportion of various air conditioners in China’s total exports......... 103 Figure 36 National distribution of international air-conditioner market......... 105 Figure 37 China’s import volume and value of air conditioner from 1998 to 2001. 107 Figure 38 Main country and regions of origin of imported air conditioners of China 108 Figure 39 Proportion of various air conditioners in China’s total imports......... 109 Figure 40 Import volume and value of air-conditioner compressor of China in 2001. 112 Figure 41 Export volume and value of air-conditioner compressor of China in 2001. 112
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