Air Conditioners: Year of Contradictions
There has never been such a strange year in the history of Russian HVAC market. The assessments of the results of the year are full of contradictions. Some companies announce a two-time increase of sales, some inform of a rather modest growth of around 20%. What happened indeed?
The past 2006 year was the first hot one since unforgettable 2002 when summer set up the temperature record. The total revenues in roubles of population grew for this period more than two times, the number of those who earned more than 500 euro per month increased 5.4 times. This increase was observed most of all in the poorest regions where the market of air conditioners was poorly developed. So, the first hot year of the period was doomed to become the year of active demand, especially on the part of individual customers. And it was. Further, the market of economical class room splits has got the additional impact in the South of the country because of lack of window air conditioners.
At the same time the demand on the part of corporative customers did not experience such a jump. Even more, the increase in the sectors of PAC and wall splits with capacity of more than 5 kWatt appeared to be significantly less than in 2005. The demand rate for room and commercial splits on the part of corporative customers also steadily goes down since 2003. It’s just the time to speak about gradual saturation of this segment of the market.
Thus we have a serious quantity growth of the market of room splits, mainly in the segment of the cheapest models made in China and Korea. On the other hand, we have a very moderate growth in the segments of elite technique and PACs. As a result the market grew up only 20% in money terms. This growth is quite comparable with the results of previous years (16% in 2005, 14% in 2004). Similar picture we have with such indirect indicator as consumption of copper pipes, which are necessary for split-systems installation. The weight consumption of copper pipes increased around 20-22%.
The actual situation at the Russian market of RAC and PAC you can see at the diagrams 1 – 3.
DIAGRAM 1
The structure of Russian market. Shares countries – manufacturers.
The Diagram 1 demonstrates the change in the quantity structure of Russian market, by shares of countries – manufacturers. Two main trends are well visible:
1. The share of Japanese equipment has been stabilized on the level of 41-47%. It swung depending on how hot was the year. The hotter the year was, the less were figures.
2. China consistently takes away the market from Korean manufacturers in the lowest price segment. Koreans finally reoriented their business in Russia to work with trade houses. In hot 2006 this policy helped them to increase the sales volume, but the first cold year could cause the fall in volume of sales of Korean’s brands.
DIAGRAM 2
Russian market of air conditioners in 1994 – 2006 in money terms (million USD, ex works price)
Mobile conditioners
Window conditioners
Wall type < 5 kWatt
Wall type > 5 kWatt
Multi split systems
Ductless PAC
DIAGRAM 3
Russian market of air conditioners in 1994 – 2006 in money terms (ex works price)
Window conditioners
Mobile conditioners
Wall type < 5 kWatt
Wall type > 5 kWatt
Multi split systems
Ductless PAC
Diagrams 2 and 3 illustrate the growth of market in money terms and the change of its structure. The decrease of share of window air conditioners in the whole sales volume is in the process, and it is well visible. The quantity share of window air conditioners will gradually get down to 5-7%, and their share in money terms – to 2-3%. At the same time mobile air conditioners set up in 2006 a record in the growth rate. This segment grew up more than twice and would continue its development.
The market of PAC and wall splits with capacity of more than 5 kWatt has a predictable growth, but the rate of growth gradually gets down and doesn’t depend on weather.
As to the market of room split systems, it will grow the nearest future mainly due to residential sector. That’s why it becomes less dependable on the weather caprices. If this summer is cold after mild autumn and unusually warm winter, we should expect a record fall down of this segment of the market. It would affect mainly trade houses, who risk not to sale even a half of delivered equipment. Generally speaking, the situation resembles the euphoria of the end of season 2002, when the record growth rate was achieved. Everybody knows what happened a bit later.
"THE FINAL LEAP TO THE SOUTH"
It’s interesting to have a look at geographical distribution of market grow by regions. In 2006 the biggest growth took place in the South of the country. In Urals and Siberia, at the same time, the quantity growth of the market was from 5% to 15-20%. Similar situation was in 2005. As a result, the markets of Southern Russia: Rostov, Krasnodar, Volgograd, Astrakhan, Stavropol and the coast of Black Sea, are close to glut. When the line would be crossed?
In Italy and Spain the growth stopped when consumption of air conditioners reached the level of 25 units per 1000 of population a year. The level of consumption of substantially more poor and less hot South Russia is now only 1.5 times less than the level of Italy and Spain. The reserve of growth is not big enough. So the annual growth of more than 20% in the South Russia could be expected only in case of abnormally hot weather. It is clear, that even if it happens, there would inevitably be a sharp back-blow in sales just after the season of steep sales growth.
At the same time, the estimated potential of growth in the main regions of Russia is of about 70-80%. The market would have a positive development, the negative dynamic could (and would!) take place only in cold years. It especially concerns the South of the country and party Moscow and Sankt-Peterbourg. The growth would be more stable and regular in the nearest years in the regions, where the market is not now well developed, i.e. in Central Russia, in the North-West, in Siberia and in Northern Caucasus.
Georgiy Litvinchuk