Exports of washing machines and dryers from China are surging even as global sales for the products have been slowing. Although overseas shipments will continue their upward trend in 2006, the industry could be headed for rough times as it deals with numerous challenges including rising production costs and increasing competition.
Washing machine and dryer suppliers exported US$1.1 billion worth of products in 2005, up 74 percent from the previous year. Of total exports, washing machines accounted for US$1 billion, representing 75 percent year-on-year growth.
The following are some of the trends we see in China's washing machines and dryers export industry:
• Many suppliers will increase export prices by up to 10 percent in the next six to 12 months as raw material costs continue to escalate.
• Competition in the industry will continue to intensify as more multinational companies attracted by the large domestic market invest in factories in the country.
• A number of large makers are enhancing their production and design capability to deal with competition. But many small suppliers with limited financial resources could potentially be squeezed out of the industry.
• Even though many large makers are shifting toward high-end products, the majority of washing machines and dryers exported from China will continue to be low end and midrange.
• The key product trends in 2006 will be water-saving and energy efficient models. New releases will feature recycling water flow systems and detergent-free cleaning action that result in lower power consumption.
China suppliers offer a range of washing machines and dryers. For the purpose of this report, these have been divided into five categories: clothes dryers, top-loading, front-loading, industrial and mini washing machines.
The Products & Prices section in the report details the features and price ranges of washing machines and clothes dryers from China. The latest trends in design and product features are discussed in the R&D/Design section.
The Manufacturing section explains the processes involved in the production of washing machines and dryers and how these differ in small and large companies. The Industry Overview elaborates on the industry composition, highlighting key characteristics of the different types of suppliers.
The majority of washing machine and dryer makers are locally owned foreign-invested. More than 50 percent of these suppliers have direct export capability, while the rest ship their products through trading companies.
Global Sources surveyed a wide range of suppliers to produce this report, which has profiles of some of the leading washing machine makers in China. With annual revenue of US$12.8 billion, Haier is one of the top three makers of washing machines in China. The company is also among the most popular washing machine brands in the local market.
Jiangsu Little Swan, a publicly listed company, is one of the leading manufacturers of washing machines in the world. The maker contract manufactures for some of the major international brands such as Toshiba and GE.
Apart from these high-profile manufacturers, we also interviewed many midsize and emerging makers, which comprise the core of the supplier base.
Washing machine and dryer production is concentrated in the provinces of Jiangsu and Zhejiang, and Shanghai, which together account for 88 percent of all washing machines and dryers exported from the country.
Industry Overview
China's exports of washing machines and dryers are growing at a healthy pace, even with challenges at home and abroad, and a global slowdown in sales.
Worldwide demand for washing machines and dryers has slowed, with volume sales for the former growing by only about 2 percent in 2005. China's volume exports of washing machines, however, went up by an impressive 51 percent in the same year.
Lower prices and improving product quality are reasons more overseas buyers are sourcing washing machines from China. Large multinational companies that have set up factories in China are also contributing to the country's sizeable export growth.
Rising domestic consumer demand for washing machines has attracted a number of well-known international companies to invest in or set up their own production facilities in China.
Matsushita Corp. of Japan, for example, has recently established a washing machine factory in Zhejiang province, which is capable of manufacturing 2.5 million units yearly.
Among the other established international companies with facilities in China are LG of South Korea, Toshiba and Sharp of Japan, Electrolux of the US, and BSH and Indesit of the EU.
Not only do these makers cater to the local market but they export their production too. In particular, the MNCs have helped boost exports of front-loading washing machines. Most China suppliers offer top-loading units, which are less expensive to produce. Only a handful of the large and well established local companies have the capability to produce front-loading models.
MNCs have also contributed to the improved production capability of local suppliers, including the manufacture of front-loading units. By way of joint ventures and technology transfers, local partners of MNCs are able to collaborate directly with central R&D teams in the corporation's mother country. This has helped enhance their overall design capability. Production lines at these local companies are also based on the latest platforms to boost efficiency and improve quality.
In 2005, China shipped out close to 2.7 million front-loading units, 135 percent more than overseas shipments a year ago. This has brought up the share of front-loading units in China's total washing machine exports from 18 percent in 2004 to 28 percent in 2005.
But even exports of top-loading units have shown strong growth. At 6.8 million units, shipments in 2005 were 33 percent higher than the previous year. Overall, China shipped out 9.5 million washing machines and dryers worth more than US$1 billion in 2005, up 50 percent in volume and 74 percent in value over the previous year.
Challenges
Although exports of washing machines and dryers are growing steadily, the industry continues to grapple with sharp increases in production costs and stiff competition.
For suppliers exporting to the EU, meeting the RoHS requirements is a major challenge. The high cost of compliance is a concern for companies with limited financial resources as RoHS-compliant materials and components are more expensive. In addition, the necessary assembly line modifications push up costs considerably.
Nevertheless, most washing machine makers targeting the EU have already started working with buyers and testing institutes to develop products that meet the RoHS guidelines.
In this report, all but nine of the featured companies have initiated measures to produce RoHS-compliant models.
Most manufacturers are now requiring their material suppliers to provide certification ensuring the quality and safety of the components. They are also asking for guarantees from their providers that the raw materials contain only a minimum amount of lead, cadmium or mercury.
Apart from complying with the RoHS requirements, makers are contending with the higher cost of raw materials, particularly steel and plastic. Due to fluctuating crude oil prices, the cost of plastic resins in China has gone up over the past 12 months. In addition, there is a marginal short supply of the material even as plastic processing companies run at full capacity.
Supplier Profile
Anhui Meiling Appliances Co. Ltd
Anhui Meiling, a member of the Meiling Group, exported US$8 million worth of washing machines in 2005,and plans to raise this to US$10 million this year. It will be joining major trade fairs in Cologne, Germany to attract more clients from Germany, the UK, France, Spain and Portugal.
The company also exports vacuum cleaners, electric irons and solar water heaters.
Products
Front-loading washing machines have rotary or electronic controls, 5 or 6kg capacity and spinning speed of 600 to 1,200 rpm. They come in stainless steel housing with tubs of stainless steelor plastic, carry the CE marking and comply with the GS standard.
Prices range from US$140 to US$240. Models with 30cm doors and 180-degree opening angles are popular. Washer-dryer combos are also available, but these are priced 40 percent more than regular models.
Top-loading washing machines have plastic housings and come in twin-tub and fully automatic versions. Twin-tub models are priced from US$45 to US$55 and fully automatic versions are about US$100.Products with stainless steel tubs cost US$10 to US$20 more than those with plastic.
The 10-member R&D team focuses on raising the products' energy efficiency rating from class C to B especially for top-loading models. The team is also working on releasing models with a speed of 1,000 rpm and expanding into dryers.
More than 30 percent of Anhui Meiling's suppliers are RoHS compliant. The company is cooperating with ITS to meet RoHS requirements and to obtain product approval.
RoHS-compliant products are priced 3 to 5 percent higher.
All this column of information contained in China Sourcing Reports is the result of original, independent and impartial research conducted by Global Sources analysts.
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