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China’s Residential Air Conditioning Prices Set To Increase

Posted by BSRIA

The average manufacturing selling prices of residential air conditioners in China are on an upward trend. Although the seasonal sales promotions try to limit or even reduce prices periodically, basic average prices of residential air conditioners are on an upward trend. At present, the average price of residential air conditioners (mainly single splits with capacity below 5kW) is close to RMB 3,000, and it is expected to move to higher prices, between RMB 3,000-3,500 in the next few years.

The increase in the basic price levels are a result of an increase in the sales of high-end and more energy efficient products, rather than the manufacturers intentionally raising the prices. There has been a significant shift in consumer demands (where previously the main criteria were price) towards units providing more efficient solutions with smart features, which also ties in with the current and expected growth in smart homes and devices in China.

According to published data, in China the proportion of inverter type residential air conditioning exceeded 50% in the first half of 2019. The proportions of smart residential air conditioning units exceeded 30%, with the market for these medium and high-end models continuing to increase their share.

Although the cost of raw materials is also an important factor affecting air conditioning prices, there are a lot of uncertainties surrounding this. As an example, global copper prices experienced a large fluctuation in the first half of 2019. In January and February, copper prices rose rapidly due to low inventory levels and positive news regarding the China-U.S. trade war. However, by May- June, copper prices declined sharply as tensions of the trade war worsened, global investors worried that the dispute would weaken demand on cooper and therefore pushed copper prices down. It is expected that in the future the price of raw materials will still be affected by many uncertain factors such as global economic environment, market supply and demand as well as inventory levels. Therefore, it is difficult to predict how much impact the cost of raw materials will have on the production cost of air conditioning units.

The air conditioner manufacturers are also eager to reduce the level of price competition and increase margins through product and technology upgrading, by introducing interaction with mobile internet, Internet of things, cloud computing, AI technology and other technologies. It has taken a few years for the market for smart air conditioners to take off. However, going forward it is expected that the growth of smart air conditioners will benefit from the rapid growth in the smart appliances and smart homes market in China which is expected to see a CAGR growth of some 30% between 2018-2030.―TVJ Bureau

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