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Rising raw material costs and sluggish growth in product demand are creating operational challenges for the Chinese air conditioning industry, impacting both retailers and manufacturers.
Manufacturers are trying to boost their performance by introducing premium models with artificial intelligence capabilities and providing subsidies to dealers to stimulate restocking. Meanwhile, retailers remain cautious about stocking up in spring, a crucial period ahead of the busy summer season.
The surge in copper prices has significantly increased production costs, according to an industry expert. Major brands are managing this by launching innovative high-end products, but smaller players are facing substantial profit squeezes, with some possibly being forced out of the market.
Sales of premium AI-enabled air conditioners are expected to grow this year, and the entry of new smart AC brands is injecting fresh energy into the market, according to an analyst specializing in the industry. However, whether the higher price tags on AI models will offset profit pressures caused by rising copper prices remains uncertain.
Due to their higher retail prices, AI air conditioners could help manufacturers recover some costs from increased copper prices, which have now surpassed CNY 90,000 (approximately USD 13,050) per ton, stated a general manager of a high-end smart AC brand utilizing Huawei’s HarmonyOS system.
Still, if copper prices continue climbing, even premium AI units may not be sufficient for manufacturers to turn a profit, he added.
AI-enabled air conditioners are seen as a new selling point and a key profit driver for retailers this year. However, since they are priced 15 to 20 percent higher than standard models, their overall contribution to total sales revenue remains limited, according to a retailer in southern China.
As copper costs surged, Gree Electric Appliances slightly increased wholesale prices for some mid-to-lower-end models, while high-end products’ prices stayed relatively steady, the retailer said.
The company plans to allocate about 5 percent of its offline sales revenue from last year to motivate dealers to restock. Subsidies will be offered based on the volume of replenishment, although the retailer remains cautious, citing industry growth pressures.
A retailer in Northwest China confirmed that some air conditioners now cost more to dealers this March, but he intends to purchase more as long as subsidies are substantial enough.
Another retailer in central China reported that due to poor market outlooks, his inventory this year is smaller than last year’s. Meanwhile, a retailer in eastern China has adopted a strategy of smaller, more frequent restocks to ensure quick sales, aligning prices with market demand to avoid excess stock.
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