China’s premium home appliances are winning domestic and global market share

Ningbo Qingmei Electric Appliance Technology 轻美电器, a smart dishwasher manufacturer established in 2019, received “tens of millions” of Series A financing this week for R&D investment, the construction of factories, and market expansion.

With dishwasher penetration in China still standing at less than 1% (compared with 50–70% in Europe and the U.S.), Qingmei is preparing itself for a market explosion, but in order to thrive in China’s competitive domestic market, the company is focusing on high-end products and competing in foreign markets.

The context: In March, Chinese home appliances manufacturers announced a new round of price increases, the latest since 2020: For example, as of March 27, the average price of refrigerators increased by 810 yuan ($127) year-on-year to 5,981 yuan ($940), and the average price of washing machines increased by 415 yuan ($65) year-on-year to 3,961 yuan ($622).

The reason is twofold: The soaring costs of raw materials like copper and aluminum, and sluggish growth in the domestic market.

• Raw materials account for 93% of the operating costs of Hisense 海信集团, for example.
• Overall retail sales of China’s home appliance market reached 760.3 billion yuan ($119.46 billion) in 2021, 7.4% lower than in 2019.

However: The market for high-quality smart products is growing rapidly. Domestic manufacturers are focusing their attention on the premium segment as well on exports:

• In 2021, Midea Group 美的集团 launched a 5 billion yuan ($785.65 million) kitchen heat intelligent appliance industrial park, and the “world’s first smart refrigerator” running the Huawei Harmony Operating System.
• Haier 海尔集团 has accelerated the development of Internet of Things (IoT) smart homes, and its subsidiary Haier Smart Home 海尔智家 issued a public offering in March. For the first half of 2021, Haier’s smart home business revenue in the domestic market was 57.461 billion yuan ($9.02 billion), a year-on-year increase of 29.9%.

Hisense expects its overseas revenue to surpass domestic revenue within the next three years. In 2021, 42% of the company’s total revenue was based on exports.

• In March, Hisense announced it was planning on building a new brand in the U.S. and Japan in 2022, and plans to open nearly 100 high-end flagship stores around the world.

The takeaway: China’s domestic manufacturers of home appliances have for years faced the problem of sluggish domestic demand — very few people have the habit of using dishwashers, for example — and fierce competition. Increasingly, however, they are now upgrading their R&D and technology and transitioning to high-end products.