Decelerated Growth Forecast in the AC Market in China in 2018

In 2017 refrigeration year (RY; end of August 2017), the Chinese air conditioner market embraced explosive growth, thanks to a scorching summer. It is estimated that air conditioner sales in RY 2017 reached 55.7 million units, indicating 29.4% year-on-year growth and a value of RMB 190.6 billion (about US$ 30 billion) indicating 35.4% year- on-year growth. The average retail price increased by 4.6% year on year to RMB 3,420 (about US$ 540), hitting a record high in recent five years.
 
According to China Market Monitor, offline sales of air conditioners enjoyed 5.3% growth on a volume basis in calendar year of 2017. Air conditioner manufacturers implemented a new sales method that made their dealers stock products in the offseason to meet a rapid demand increase in the peak season. Manufacturers offered subsidies for their dealers to promote sales. High demand in the peak season forced manufacturers to expand production capacity. However, once demand shrinks, the whole industry faces high inventory volume again. At the end of October 2017, total inventory in the air conditioner industry amounted to 32.3 million units, and channel inventory surpassed 24 million units. Facing such high inventory pressure, air conditioner manufacturers are developing new products and penetrating third-tier and fourth-tier markets in rural areas of China.
 
Suning released the 2018 White Paper for Air Conditioning that says only rural markets have potential

In January 2018, the growth rate fell down to –4.6%. As scorching summers in the last two years saturated air conditioner demand and the real estate market is encountering a downturn, explosive sales like last year will not be anticipated in 2018. Moreover, the price of copper has risen by 22% in three years, and will remain high in 2018. Rises in the prices of raw materials are boosting air conditioner price rises, and this trend will exert negative effects at the consumer level.
 
As a whole, although losing its momentum, the Chinese air conditioner industry is expected to maintain a growth trend in 2018.