Price war cooling off for household appliances producers

Price war cooling off for household appliances producers

China's household appliances are increasing investment in mid- and high-end products instead of engaging in another "irrational" price war, Economic Information Daily reported.

With the price rises in raw materials and the government's requirement of energy labels for household appliances this year, the manufacturers have stopped trying to under-price the competition and focused on developing products to win back the declining the market shares.

This year the cost of making an air conditioner will be up 20 percent as raw material costs make up one-third of the total cost.The iron and steel price has risen 70 percent this year compared with the price in last October. The price of plastics is up 73.9 percent and that of galvanization plate, up 39 percent and copper,up 1,600 yuan (about 180 US dollars) per ton.

As the hot season for selling air conditioners is drawing near,both domestic and overseas producers have worked to increase their sale prices.

According to the report, majority of some 40 new kinds of LG air conditioners that target Chinese consumers this year are high-end and new products. Gelanshi in south China's Guangdong Province,well-known for its low price strategy, also has been thinking of winning another expected wave of war by high technology.

The call by producers to raise the price of household appliances was echoed by China's leading retailers such as Dazhong,Suning and Yongle.

According to a forecast of Suning, the average price increase for an air conditioner would be 220 yuan this year, up 11 percent.

The average sales price of air conditioners by Dazhong was alsoup 316 yuan compared with 2004, the report said.

Despite these price increase, industry insiders predicted the overall price of household appliances will remain comparatively low this year, because of the large stockpiles of products after domestic makers expanded their production last year.

Price war, as a double-edged sword, played a vital role in the growth of China's household appliances industry. The fierce competition reduced the prices of the products to the benefit of consumers. Meanwhile, it greatly cut companies' profits and made it hard and almost incapable for them to develop high-end and new products.