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Air-conditioner sales up 28.64% yr-on-yr [China]
China - The air-conditioning industry, long living at the mercy of the elements, encountered a lot of awkward situation in the freezing year of 2011 (September 2010 to August 2011): sustained rainfall in the south China, fluctuation in exchange rate and cost increase etc.

Especially, the energy subsidy policy for air-conditioner came to the end in June this year and the policy of home appliances to the countryside in the first batch of pilot areas will also expire in the upcoming November.

A lot of factors affect much the operation of air-conditioning industry, but it is surprising that the industry still stood up to the pressure and made a satisfactory achievement in the freezing year of 2011. According to the data, in the freezing year of 2011, the sales volume of air-conditioner in China's major cities increased by 20.45 percent year-on-year and sales amount by 28.64 percent. It was the first time that the growth speed of sales amount exceeded that of sales volume in recent 5 years, which indicated that the mode in which the air-conditioning industry won with price had begun to be changed.

Price rise is a rational return

Cai Ying, assistant director of information resource development department of State Information Center, makes an analysis that "the major factor that the growth of air-conditioner sales amount is quicker than that of sales volume in the freezing year of 2011 is the rational return of air-conditioner price."

According to the data, the overall average price in the air-conditioning market tended to rise year on year in the freezing year of 2011. The overall average price rose by 13.38 percent year-on-year compared to that in the freezing year of 2010, among which the price of variable frequency air-conditioner rose by 4.91 percent year-on-year and fixed frequency air-conditioner 11.17 percent.

As for the reasons for price return, Cai Ying said that three factors including policy adjustment, product structure adjustment and increase of various combined costs are the keys for the air-conditioner price rise in this freezing year.

Firstly, after the expiration of the energy subsidy policy for air-conditioner in June 2011, which had played an important role in the enterprise sales increase, the price of energy-efficient fixed-frequency air-conditioner encountered a huge shock. All enterprises began to seek internal potential to digest the cost increase due to the subsidy cancellation in order to make sure that their market shares were not much affected. Finally, however, such an influence was still reflected in the price level and the price of energy-efficient air-conditioner increased obviously.

Secondly, the implementation of energy subsidy policy for air-conditioner leads to the rapid proportional increase of energy efficient air conditioning products. Leading enterprises spare no effort to promote variable frequency air-conditioner and drive its overall proportional increase, the sales volume share of which is nearly 40 percent.

Two factors result in the bigger change of the general air-conditioning product structure in this freezing year and finally, such kind of change of average retail price level due to product structure adjustment becomes one of the factors to lead to the price rise in this freezing year.

Thirdly, cost is an issue to which enterprises pay special attention in the beginning of the freezing year of 2011 and cost inflation has a much obvious influence on the domestic air-conditioning industry. The compressor cost rise due to the general increase of raw material cost, labor cost, logistics cost and sales cost and especially the dramatic rise of rare earth price is quickly reflected in the product sales end.

Market competition tends to be fiercer in the tertiary and quaternary cities.

As the highlight in the freezing year of 2011, the tertiary and quaternary markets made an outstanding contribution to the overall industrial increase, which was mainly reflected in two aspects including the rise of sales scale growth and increase of overall consumption level. According to the data, the general scale in the tertiary and quaternary cities kept the trend of gradual expansion in the freezing year of 2011. Among them, the sales volume in the tertiary cities increased by 37.50 percent year-on-year and quaternary up to 70.88 percent, much higher than the average growth and the growth in the primary and secondary cities.

Why was there the explosive rise in the tertiary and quaternary markets in the freezing year of 2011? Cai Ying believes that the deep reason is that after several years of rapid increase, the consumption demand in the primary and secondary cities gradually tended to be saturated and a lot of enterprises began to focus on the tertiary and quaternary markets, so that the tertiary and quaternary city and town markets had gradually become the important markets to guarantee the overall air-conditioning sales scale in China and the important force to support the further development of the air-conditioning industry.

Air-conditioning enterprises define the establishment of sales channel as their weapon to fight for the tertiary and quaternary markets. A batch of leading enterprises like Green, Midea, Haier and Chigo have set up the relatively complete distribution system in the tertiary and quaternary city and town markets, which makes an obvious contribution to their sales increase. Some strong manufacturers begin to actively establish their own channel for air-conditioning sales by means of franchise stores, dealers and agents and gradually incorporate into the whole sales platform of the enterprise's sales company for relatively strict management.

In addition to the gradual increase of the overall sales scale, the consumption level and structure in the tertiary and quaternary city and town markets are also enhanced and changed. Energy-efficient and variable-frequency products have become the mainstream of consumption in these markets and their acceptance for new products is even quicker than that in the primary and secondary cities. Just in view of such kind of change of consumption level, air-conditioning enterprises begin to lay more stress on the variable-frequency air-conditioner besides establishment of deep channel, in order to seize the increase opportunity due to the change of consumption demand structure.

The domestic and foreign markets are given the same consideration.

Currently, China air-conditioning industry is facing with tests including ceaseless change of international and domestic markets and a lot of uncertainties. In the international market, a series of unstable factors like decline of the US economy, continued spread of the European debt crisis and stagflation of the rising markets lead to the problem that there is insufficient demand in the several traditional advantageous areas for air-conditioning export. And in the domestic market, after years of rapid development, products become popular quickly and policy drive tends to weaker increasingly. These severe macro factors and market change should be paid enough attention by enterprises.

Wang Lei, vice chairman of China Home Appliances Association said that under the current variable environment of air-conditioning industry, in view of the more and more complex market competition, air-conditioning enterprises should consider how to give their competitors more tolerant, participate market competition and guide consumption more actively and positively, efficiently control the enterprise competition mechanism and assume their social responsibilities, so as to guarantee continued and healthy development of the air-conditioning industry.

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