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A seasonal sale of air-conditioners has begun as major domestic producers and retailers try to cut their excess stocks following a bleak 2002 and recoup some cash for next year's development.
Suning Electronics, one of the largest home electrical appliance retailers, launched a nationwide price cut on more than 10 brands and 30 models of air-conditioners.
The brands include Haier, Midea, Kelon, National and Sanyo, all leading players in the industry.
The price cuts average 10 percent, but bargains are to be found with up to 30 percent off.
Sun Weimin, vice-president of Suning, said sales promotions in winter help reduce the industry's huge stocks.
Winter is, of course, the low season for air-conditioner sales.
Sun said unsold stock in 2002 may reach 5-6 million units, but this was contradicted by statistics which suggested the number could be as high as 10 million.
Data from the China Household Electric Appliance Association showed the industry's output totaled more than 24 million units in 2002.
Statistics from the State Economic and Trade Commission, reported that sales of air-conditioners reached 14 million. These figures were gathered from the industry's 2002 financial year reports.
The industry's financial year runs from September to August of the following year.
The excess amount of stock was caused by over-supply and over-optimism on the part of domestic manufacturers as to the potential of the market, their failure to properly assess its expansion capacity, and stagnant sales during the peak business season because of unseasonally cool weather.
The first quarter of the industry's 2003 financial year has already passed, but the market is still stagnant, Sun said.
"The only way to stimulate the market is lower prices," said Sun.
The price of air-conditioners has witnessed a sliding trend in recent years because of rounds of price cuts.
Data from the National Bureau of Statistics showed the average price for an air-conditioner stood at 4,200 yuan (US$507) in 2000. That dropped to 3,200 yuan (US$387) in 2001 and 2,500 yuan (US$302) in 2002.
Jiang Feng, vice-director of the China Household Electric Appliance Association, expects prices to continue to fall.
He estimated an average drop of 300-500 yuan (US$36-60) in 2003.
But the low-price strategy has not turned out as popular as producers had expected.
For example, a favorable deal offered by Aux Air-conditioner last week in Guangzhou was given the cold shoulder.
Major retailers said few people bought the package which included a cabinet air-conditioner at 4,300 yuan (US$520) and a split wall-mounted one for just 1 cent (0.12 US cent).
Consumers are mostly adopting a wait-and-see attitude because they think prices will continue to fall, said Jiang.
The industry's performance echoed Jiang's prediction earlier this year in which he warned that the domestic air conditioner industry will face a difficult year of huge losses and the disappearance of the weaker players.
Of the 200 or so brands on the market only 30 survived last year.
To offset languid domestic sales, many major players have set their sights on overseas markets next year.
(China Daily November 25, 2002)
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