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China Targets Efficiency in Appliances with New Program

19 February 2015

China, the world’s largest home appliance market, has established a new program to help improve energy efficiency in home appliances in an effort to cut its ever-rising demand for electricity, according to new research from IHS Technology.

Under the Implementation Scheme of Energy-Efficiency Leader System, the program hopes to provide long-term energy savings in the country by replacing older, energy hogging appliances with newer, more efficient ones as well as to help reduce carbon emissions coming from these appliances. The program involves seven Chinese government agencies including National Development and Reform Commission, the Ministry of Finance, and the Ministry of Industry and Information Technology

China has the largest population of any country in the world and many of these households use old appliances that combine to be a huge drain on the country’s energy resources, IHS said. With the program in place, not only will these older appliances be replaced but it could become a key driver for growth in China’s domestic home appliances industry.

Dinesh Kithany, senior analyst for home appliances at IHS, said in a statement the program will “have a snowball effect, promoting conservation in other segments of the market” as well as the proliferation of “sensors, better displays and touch-control capabilities” which will “pave the way for the quicker adoption of smart home technology.”

IHS forecasts units shipments of air conditioners, washing machines and refrigerators (that had a compound annual growth rate (CAGR) of 14 percent and 21 percent between 2008 and 2013) will reach 150 million units in 2015, up from 146 million in 2014. By 2019, shipments of these three categories will expand to 160 million units.

Unlike previous subsidies for new energy-efficient appliances to encourage consumers to replace older devices, the new program does not include such incentives to consumers. As a result, IHS believes the white-goods market won’t benefit as much from this program as branded products.

“Given the high penetration rate of white goods in China’s urban areas, the market is dependent on product replacement among consumers,” said Horse Liu, principal analyst for home appliances at IHS. “This is where government subsidies can help in encouraging young and tech-savvy consumers to replace older, non-smart appliances with a new generation of smart products.”

An unintended effect of the program could be a continued hold on the market from major Chinese home appliance makers, IHS said. Since these companies have the large financial muscle to bring about changes in their product lines, the smaller domestic manufacturers may have trouble financially committing to the higher energy-efficient standards.

Gree and Midea, the Top 2 Chinese brands for white goods in 2014, controlled more than 50 percent of the unit shipments for air conditioners, washing machines and refrigerators in the domestic market. Along with Haier and Hisense, the four major players in the domestic Chinese white-goods market are forecast to maintain their dominance in the next five years, IHS said.

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Related links:

IHS Power & Energy

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