We believe that the real "price war" is to seize market share by reducing gross margin. Other forms of appropriate price promotions are a common marketing tool. This year, from the point of view, it is indeed observed that regardless of the average price of the industry or the average price of leading enterprises has decreased, but we believe that this does not mean that the industry has a "price war."

Our judgment: the decline in raw material costs is the main reason for the decline in average price

If we look at the price trend of major bulk raw materials, we will find that the prices of major raw materials such as copper, aluminum, plastics and steel have started to decline in the fourth quarter of 18 years. Looking back at history, we found that in a fully competitive market, the cost of air conditioners has a considerable degree of correlation with the average price of air conditioners. Despite the increase in average prices due to consumption upgrades and improvements in the category structure, the overall trend will still be in line with the fluctuations in raw material prices. Therefore, we believe that the core reason for the downward price of this round of air conditioners is the cost reduction.

Why is the beauty significantly more than the Gree price cut? ——Using cost advantage to seize the market is the right strategic choice

We may wish to observe the production rhythm of the United States and Gree: from June 2018 to October 2018, during these five months, Gree's scheduling plan is more radical, the growth rate significantly exceeds the industry average and the second largest production. Shangmei. From December 2018 to January 2019, during the two months, the US's scheduling plan was significantly higher than Gree; this period is also the time when raw material costs begin to fall sharply. It is this part of the product with significant cost difference that forms the difference between the price trend of the US and Gree terminals.

Will there be a real "price war" in the future?

First of all, we believe that before the real sales season comes, it is not in line with business logic to go to inventory early to trigger a price war. This means that there is no possibility of a large price war before the summer, only around Price fluctuations in promotions. We believe that there are three factors that may affect the “price war” at present:

1) Inventory level: current channel inventory level is controllable

From the channel inventory situation, in February 2019, the channel inventory was 39.4 million units, and the channel + industrial total inventory was 48.34 million units, which has exceeded the peak level of the absolute quantity of inventory in 15 years. At the same time, due to the obvious expansion of the industry, based on the average of domestic sales in the past 12 months, the current overall inventory level (digested months) is still far from the 15-year peak.

2) The completion of real estate completion data at the end of 18th means that after the peak season this year, the marginal improvement of real estate factors will start to slow down the demand side of home appliances.

3) Industry concentration is still relatively stable, leading enterprises still have obvious advantages

As for the difficult season to judge the peak season weather, we can only do a good job in the third quarter of the daily terminal tracking to make a good judgment, it is indeed difficult to predict in advance.

Jiangsu Jincheng Air Conditioning Engineering Co., Ltd. focuses on:

Industrial air conditioners, chemical fiber industrial air conditioners, chemical fiber industry refrigeration, textile industry air conditioners, clean room refrigeration, ventilation ducts, cooling towers, refrigeration machines and other air conditioning units and accessories.