The Chinese market for packaged air conditioning in 2005 is estimated at around US$ 7,800 million, marking a 12% increase from 2004. Growth is expected at 9.1% CAGR till 2010. The faster-growing markets will shift from first or second tier cities to third and fourth tier cities and rural areas, with more demand for top end market products as income levels rise.
The vast majority of products in the packaged air conditioning market are still minisplit systems; among these, 96% are the single split type. Window units are slowly receding from the market, while the moveable market remains small at 78,400 units in 2005. The vast majority of window and movable units made in China are for the overseas market.
High demand from the upper end of the residential housing market and offices has caused the market for VRF units to double since 2004, with Daikin expanding its local Chinese production and some Chinese manufacturers now starting to sell significant quantities. Meanwhile the rooftop market has remained static, although some manufacturers are now making this type of unit in-house rather than importing.
Exports are expected to soar in the next few years with China having become the 'world factory' for air conditioning products. There is also a trend that the Chinese manufacturers are investing more on building up a strong brand in order to yield better margins than they would selling to OEMs.
Central plant air conditioning
The Chinese market for central plant air conditioning in 2005 was estimated at US$1,400 million representing an increase of 8.2% from 2004. The active construction sector, hot summers and generally strong economy are all factors favouring continuous growth. Chillers accounted for around US$ 1,000 million of this, representing growth of 12% in the same period. The trend of reciprocating chillers being substituted by other types, mainly screw chillers, is becoming more and more obvious.
Modular chillers, mainly made up of small scroll chillers, have become more and more popular due to their low cost and flexibility, and account for much of the growth in chiller sales generally. The market for centrifugal chillers increased 12% by volume from 2004 to 2005, helped by some large projects relating to the forthcoming Olympic Games in Beijing.
The central plant market is expanding as a whole and Chinese manufacturers gained share in newly developed markets, both in geographical and product terms. There was significant growth in exports of central plant units in 2005, due to international companies regarding their Chinese factories as a production base for export and some Chinese manufacturers exporting very aggressively.
Drivers
The Chinese economy has been growing strongly with around 8-9% GDP increase each year. The construction industry has been booming in both the residential and commercial sectors.
Some new National Energy Efficiency Standards were introduced in March 2005 by the Standardization Administration of China, forcing Chinese manufacturers to make more energy efficient units. Companies able to exceed the new requirements have been using this as a new selling point.
The Chinese government has a clear strategy to develop the western and inland areas of China, and there are plans for 60% of the Chinese population to live in towns and cities by 2020. Thus there will be a big demand coming from the west and these new urban areas, which could overlap.
The Beijing Olympic Games is expected to be a boost to the central plant market. However, Beijing and its surrounding areas only represents less than 7% of the population of China so the boost effect will not be as obvious as in Greece before the last Olympics. There is expected to be some decline in sales later, particularly in screw and centrifugal chillers, however for the same reason it will not be so obvious.
Brands
Many brands have disappeared from the residential market, reducing from over 300 manufacturers in 2002 to just 45 in 2005. Only half of these brands have national sales coverage. This phenomenon is attributable not only to fierce competition on price, but also crippling increases in raw material costs.
Market share in the room and packaged sector has become more and more concentrated towards top brands such as Midea, Gree and Haier, whose combined market share increased to 40% in 2005. These manufacturers are also expanding their production capacities and anticipate further sales growth. In total, local Chinese manufacturers dominate the domestic market with around 70-75% market share. International brands are more likely to provide products to niche markets.
Since entering the central plant market some 10-15 years ago, established international companies such as Carrier, York (Johnson Controls), Trane and McQuay (Daikin) have dominated with their advanced technology. However many Chinese manufacturers have made rapid progress in this market following their success with residential products. Companies such as Haier, Midea and Gree are aiming to be world class air conditioning manufacturers in the same league as their foreign rivals.
BSRIA`s fully updated Chinese Market for Air Conditioning study was published in July 2006, with separate reports available for: Windows and Moveables; Minisplits; Large Packaged and Close Control; Chillers; Air Handling Units; Fan Coils.
For further information please contact BSRIA:
Tel: +44 (0) 1344 465600
Email: wmi@bsria.co.uk