Global Air Conditioning Market Review and Prospects in 2013

After experiencing rapid growth for several years, the global air-conditioning market began to slow down. Although the air-conditioning market in 2013 may have good performance from the perspective of the global air-conditioning market in the first quarter of 2013, it still needs time to examine. In 2012, how did Daikin buy Goodman in the U.S. to bring changes to the US air-conditioning market? Why does the air-conditioning market in India and Russia fall rapidly? How does Indonesia's air-conditioning market increase in double digits?

In 2012, the global air-conditioning market was 95.89 million units, down by 1% year-on-year. It is worth noting that the global air conditioner market has for the first time in several years witnessed a slowdown in the growth of the emerging air conditioner market, which may have a great impact on the global air conditioning market.

Markets around the world: there is a rise

In 2012, the scale of the air-conditioner market in the BRIC countries declined. As the world’s largest air conditioner market, China’s market size in 2012 was reduced by 8% compared to 2011. In Brazil, the largest air-conditioning market in the southern hemisphere, demand in 2012 also decreased by 1.6% year-on-year to 3.2 million units. The air-conditioning market in India, which had experienced rapid growth in 2011, experienced a decline in 2012, falling by 9% to 3.9 million units.

Due to the economic downturn in Europe and the decline in consumer purchasing power, the total demand for the European air-conditioning market in 2012 will be 3% lower than in 2011. In addition, the decline in infrastructure investment also led to a decrease in demand for VRF systems as well as air conditioning. However, in some areas of Europe, sales of air conditioners have increased due to heat waves, and market demand has risen.

In 2012, the summer in Turkey was particularly hot and long, and the air-conditioning market has grown. The increase in room air conditioners was 18% higher than in 2011. The demand for cabinet air conditioners also increased by 10% year-on-year.

In 2012, the air-conditioning market in Russia that was once favored fell by 5% compared to 2011, to 2.1 million units. However, Russia has not been seriously affected by the economic recession in Western European countries. If summer heat emerges in 2013, the air-conditioning market is still expected to recover significantly due to the huge demand potential.

In South-East Asia, double-digit growth in the air-conditioning market in Indonesia, Thailand, Malaysia and Vietnam occurred in 2012. Southeast Asia has a hot year and young population. These two factors are the main reasons for the growth of the air-conditioning market. The rising middle-class spending power will trigger further growth in the air-conditioning market in this region.

In 2012, the total market size of the air-conditioning market in Southeast Asia was close to 5.4 million units. As in the past few years, the annual growth rate has continued to exceed 19%. It has to be said that although the air-conditioner market in Southeast Asia has achieved double-digit growth, it is still insufficient to make up for the decline in the Chinese market, the flat demand in North America and the scale reduction in the European market.

According to JARN, Indonesia and Russia became the world’s fifth largest air-conditioning market in 2012, with an air-conditioning market scale of 2 million units, an increase of 24% year-on-year. The Indonesian economy is developing at a rapid pace due to continuous and large foreign investment. To this end, the air-conditioning market is expected to achieve a year-on-year increase of more than 20% in 2013.

The per capita gross national product of Thailand is about US$6,000, and the wealthy middle class has a strong spending power and has promoted economic development. Thailand's air-conditioning market grew by 15% in 2012, with a total of nearly 1.2 million units. Thailand is a production base for many Japanese manufacturers and an export hub for the international market. China's attractive air-conditioning component manufacturers have also begun to set up factories in Thailand.

Euromonitor International, a UK market research firm, predicts that by 2020, the proportion of the Vietnamese middle class’s total population will have doubled from 2010, from approximately 25% in 2010 to nearly 50%. Taking into account this growth factor, JARN expects the air-conditioning market in Vietnam will reach a scale of 1 million units in the coming years.

Africa has a population of 1 billion, which accounts for 15% of the world population. The air-conditioning market in Africa has great potential for development. Despite people’s impression that Africa represents poverty and agricultural economy that can only sustain their livelihoods, the living standards of many African countries have actually come a long way. The sales of home appliances in Africa are increasing dramatically, and the air-conditioning market in many regions has grown significantly. Nigeria, an important market in West Africa, has grown into a large-scale air-conditioning assembly center in the past few years. JARN forecasts that the demand for air conditioning in Africa will be about 2.6 million units, accounting for 2.7% of the world total. Thanks to the easy installation of the VRF, the air-conditioning control partition can be more easily implemented, the benefits thereof have been re-approved, and the VRF market in various countries is also booming. At present, the world VRF market is mainly divided into two major markets: China and Japan.

In China, VRF for buildings and small VRFs for residential use have both increased by 8% over the previous year. Small VRF systems installed in luxury homes have seen a significant increase. U.S. manufacturers and local medium-sized manufacturers also began to quickly enter this part of the market.

In Japan, after the earthquake and tsunami in 2011, the demand for gas heat pumps (GHPs) was greatly increased due to their ability to replace electricity. The system is an effective way to balance the use of electricity and gas. Other countries may also consider introducing such a system.

Mergers and Acquisitions into Market Highlights

For major air-conditioning manufacturers, fierce competition on the world stage is beginning to open. As international competition is becoming more and more intense, many companies have adopted mergers and acquisitions to buy time with money and take their place in the market competition. In the past, U.S. companies were the main promoters of mergers and acquisitions. Now Japanese and Chinese companies have begun to reorganize their sales channels and participate more in international mergers and acquisitions. The goal is to gain market share and attract talents. This also opened up a new round of market competition.

The biggest news in the air-conditioning industry in 2012 was that Dakin bought Goodman from the United States. This merger has made it possible for Daikin to become the #1 air conditioner manufacturer in the US market.

At the same time, Chinese manufacturers also leapt to the top of the world through mass production and OEM sales. In the next few years, Chinese manufacturers will need to develop their own branded production lines worldwide to further increase their market position. To this end, the United States and Carrier cooperate in India, Brazil, and the Middle East. Haier bought New Zealand Fisher & Paykel, and Hisense formed an alliance with Whirlpool in the United States.

In addition, many air-conditioning manufacturers have adopted local manufacturing and local consumption strategies and have established factories throughout the world. This also reduces the risk of currency. At the same time, the need to centralize decentralized manufacturing bases has become increasingly significant, that is, through large-scale production to reduce costs. How to balance the demand for centralized and decentralized production is an issue that air-conditioning manufacturers will face and solve in the coming years.

New Technologies and Functions and Future Trends

In the world's two major air-conditioning markets, namely, China and the United States, inverter air conditioners have encountered completely different situations. With the growth of the Chinese air-conditioning market, the proportion of inverter air conditioners has risen from 7% to 51% in less than five years. China will increase the energy efficiency standard for inverter air conditioners in 2013.

At the same time, the overall use of inverter air conditioners for residential use in the United States is less than 3%. In 2012, after Daikin acquired Goodman, the leading integrated air conditioner manufacturer in the United States, inverter air conditioners will challenge the constant speed air conditioners that dominate the market. This trend shows that in the future, the US air-conditioning market will adopt more frequency conversion technology.

Air-conditioning manufacturers are committed to developing new technologies to produce higher-performance air conditioners at lower cost. In order to save costs, all-aluminum heat exchangers have been developed. This is because the price of aluminum remains stable while the price of copper continues to rise. Other development efforts have focused on replacing scarce resources on Earth with other materials, such as the use of rare earths to maintain the original performance of the motor, and the new motor technology will be put into commercial use.

High value-added air conditioners have the following features: air flow control without sacrificing comfort, remote control using IT technology, networked operation using smart homes and smart phones, and air purification that can remove fine particles (PM2.5) Technology and so on.

China and the United States account for more than half of the global air-conditioning market. When the European market stalled, the US market is gradually warming up. Although China’s growth has begun to slow down, it is still progressing steadily. In addition, the emphasis on environmental protection is increasingly manifested in the two major markets of China and the United States. Energy-saving air-conditioning has attracted more attention.

The EU has announced a revised draft of the F-gas regulations that will prohibit the pre-conditioning of refrigerants in air-conditioning equipment. Once implemented, this regulation will hinder the healthy development of the air-conditioning market. Air-conditioning manufacturers are also paying close attention to the trend of the regulation.

At the same time, among the fast-growing emerging markets, such as Latin America, Africa, and India, new eco-friendly, high-performance air conditioners have become a tool for reducing environmental damage and saving energy, and have inspired more and more demand.