http://www.tmcnet.com/usubmit/2006/06/26/1695064.htm[June 26,...

http://www.tmcnet.com/usubmit/2006/06/26/1695064.htm

[June 26, 2006]

Price Means Everything

(China IT Watch Via Thomson Dialog NewsEdge) BEIJING, Jun 26, 2006 (SinoCast China IT Watch via COMTEX) --Air-conditioners will become more expensive this summer, some Chinese home appliance retailers have surprised the market by slashing prices instead.

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Gome, the country's largest home appliance chain store retailer, announced lately week that it would lower the price of most air-conditioners by 15 to 20 percent.

The Beijing-based electrical appliance chain Dazhong also said that it would not raise prices and said some air- conditioners would go on sale for less, with the highest drop of CNY 1,600 per unit.

Since early March, major domestic air-conditioner makers announced they would lift prices by as much as 15 percent because of rising costs of raw materials.

"Price hikes are not good for consumers nor for the market," said He Yangqing, Gome's brand management director. He said the firm has one million air-conditioners in stock, and plans to sell them at reduced prices.

"Retailers will not raise prices in case they may lose out on this year's best-selling season, and manufacturers have also hesitated in making any bold moves," said Yang Jun, Dazhong's air-conditioner business director.

However, Jiang Feng, secretary-general of the China Household Electrical Appliances Association, said manufacturers will find it difficult to survive if the price war continues, as the air-conditioner manufacturing industry is already suffering from losses. ''Some manufacturers did raise their prices a little in March and May, according to major retail chain Suning.

Xu Dongsheng, deputy secretary-general with China Household Electrical Appliances Association, said this week that profits have fallen in recent years, but increases in the price of raw materials especially copper and aluminium will add more pressure to profit margins on home appliance products, especially air conditioners and refrigerators.

Air conditioners use as much as 6 kilograms of copper for one product. But the price of copper at the Shanghai Futures Exchange reached CNY 80,000 per ton on May 12, compared with CNY 17,000 per ton at the end of last year.

"Appliance makers had to figure out ways to absorb the price hikes by themselves before, but the rise of the copper price is just too much for them this time," Xu said.

According to market monitoring firm GfK, the average price of air conditioners rose by 4.6 per cent year-on-year to CNY 2,823 in the first quarter.

Haier, the largest maker of air conditioners, was reported to have raised its prices in Nanjing, capital of East China's Jiangsu Province, by as much as 15 per cent, while Gree, the second largest, is expected to lift prices by 3 to 10 per cent.

Changhong, a TV giant, but a smaller player in the air conditioner market, will also boost prices by 10 per cent on average.

Liu Haizhong, a spokesperson for Changhong, said the price rise mainly affects new products with functions like power- saving, so older models will not be significantly affected.

However, major retailers said the guiding prices would not impact their sales and they had no intention of raising prices.

He Yangqing, a spokesman for the country's largest electronic appliance chain Gome, said his company had already signed a supply contract with air conditioner makers in March to buy products worth CNY 5 billion.

From eWeek, Page 1, Friday, June 23, 2006
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