China’s domestic room air-conditioner market bottoms out

Volume soars 23.4% YoY in August.

After a period of slowing consumer demand, China’s domestic room air-conditioner shipment volume grew 23.4 percent year over year in August 2016, reaching 6.6 million units. August is peak month, before the usual volume declines in Autumn, said IHS Markit.

Large areas of China experienced hot weather in July and August, which triggered more sales of room air-conditioners. As a result, retail inventory declined to normal levels in September and appliance makers implemented flexible sales strategies to reach their sales targets in the second half of 2016. IHS Markit expects that the domestic room air conditioner market will recover growth, beginning in the second half of 2016 and into the first half of 2017.

While appliance makers usually ship large stocks to their sales channels after the Spring Festival, to support the summer retail market, this year the bulk of appliance makers smartly adjusted their production plans and sales strategies, to reduce risks of over-supply and stock issues. This healthy sales strategy meant volume shipments were larger in the summer than in the spring this year.

Appliance makers’ monthly shipment activities not only complied with the market demands, but also jibed with the hotter weather conditions this year. Consequently, majorities of room air-conditioner makers improved profit performance this year, with only moderate price competition. Appliance makers are expected to continue to adapt to market changes and manage sales channels. However, if appliance makers ship too many goods to sales channels to reach short-term sales targets during the low season, they will again suffer from higher inventory levels.

Many leading appliance makers experienced unit growth in domestic room air-conditioner market. For example, the leading air-conditioner manufacturer, Gree Electric Appliances Inc. (Gree), experienced its first increase in August this year, retained the position of being the number one maker of room air-conditioners in China domestic market during first eight months of 2016. Midea Group (Midea) ranked second in the air conditioner segment, though it still suffered unit shipment declines in August compared to same period last year. Midea’s growth is expected to recover in September or October this year.

Also in August, second- and third-tier appliance makers, such as TCL Home Appliance Group and Hisense Group, registered yearly growth in shipment volumes unit-shipment growth in August. They are actively developing new products and markets, in order to retain volume growth levels.

According to the IHS Markit Home Appliance Intelligence Service, the global room air-conditioner market also experienced year-over-year growth in the first half of 2016. While hotter weather was the primary cause of industry growth in India and South Korea, growth in other countries was mainly supported by increasing adoption of smart, connected technology within this product segment.