HVAC market of Far East

Distinctive features of the region, which influence development of the HVAC market.

Far East of Russia is reach in minerals and other natural resources. It used to be wishful aim of famous travelers and the place of exile of rebels and freethinkers at the same time. China here is mach more close than Moscow.

The Far East Federal District includes 10 regions: Republic of Sakha (Yakutia), Primorskiy Kray (territory), Khabarovskiy Kray, Amur Region, Kamchatka Kray, Magadan Region, Sakhalin Region, Jewish Autonomous Region, Chukotka Autonomous Region.

At the same time, Yakutia has its own specific features, different from the rest of the region. Its geography, population and economy are very distinctive. It deserves being examined separately. In this article we would limit our analysis of the regional HVAC market to only Far Eastern coast of Russia and its biggest cities – Khabarovsk and Vladivostok.

Climate of the region is very diverse because of the greatness of its territory. Vladivostok has a pronounced monsoon climate. In winter prevails dry and frosty weather. Spring is early, summer is wet and foggy. Typhoons are a common thing. Climate of Khabarovsk is sharp continental, winter is cold and summer is hot.

Average temperature of the most populated parts of the region changes from +23C in summer to – 21C in winter. Geographical relief is very different and complicated: there are islands and peninsulas, hills and ridges, height DROP íèçÿ íèçÿ íèçÿ íèçÿs of dozens of meters, strong winds.

Vladivostok, the biggest city of the region, has population of a bit more than 600 thousand people, and of about one million with suburbs. Population of Khabarovsk is a little less than 600 thousand. Main branches of industry are energy production, food industry, machine building and metal processing. Vladivostok is a base of fishing and refrigeration fleet. Evidently, fishing and fish breeding, woodworking and pulp-and-paper industry are traditionally well developed in the region because of its natural resources.

Despite of the richness of the region, the road net is poorly developed in Far East, regional infrastructure is also underdeveloped. There are no really reach markets, level of revenues of population is very close to the Russian average. Monthly average salary is between 12 and 18,5 thousand roubles.

At the same time we should note that the region develops very rapidly. Some experts connect this fact with depletion of natural resources in the European part of Russia, some with the growing influence of the Asian countries.

Geographical position of Far East Region determines not only its climate, but also its economical features. Moscow is in some thousand kilometers, but Japan is only beyond the strait and China is just next door. Surely, Vladivostok became the main trans-shipment point in import of second hand Japanese cars into Russia. Local market is full of Chinese technique, including HVAC equipment.

Construction activity in Vladivostok and Khabarovsk

Recent years construction of residential and commercial real estate develops very actively in Vladivostok. Japanese, Korean and Chinese construction technologies are used very successively. Because of wet and rather hot climate, air conditioning and ventilation systems becomes a common thing for trading facilities and commercial buildings.

Customers pay mail attention to the quality and durability of equipment. Economic efficiency is also very important. Construction market of Vladivostok has some specific features. One of them is that private customers predominate. Because of it investors need not only modern technique, but also high quality installation and maintenance.

Residential real estate

Khabarovsk has two municipal target programs of residential construction: "Social hypothec for citizens of Khabarovsk for 2006 – 2017" and "Homes for young families for 2006 – 2009". Within realization of these programs in 2007 there started in Khabarovsk the construction of 18-floor residential building in micro district "Parus". Construction of some residential buildings were started in the same district before, in the form of construction co-partnership. The mayor of Khabarovsk Andrey Sokolov noted, that "in 2007 it is planned to commission 150 thousand square meters of dwelling. Capital investments from the city budget into 37 objects of construction and reconstruction would reach about half million roubles". In the first half of 2007 regions of Far East Federal District increased the rate of commissioning of dwelling by 22,3% (290,7 thousand sq. meters) as compared with the same period of previous year. Unfortunately, it is the lowest indicator among the federal regions of Russia.

Commercial real estate

Recently in the central part of Khabarovsk started construction of Interregional Center of Economic Cooperation with Exhibition Hall and well-developed infrastructure. It would be the class "B" administrative building with total square 20,3 sq. meters. Also under way is construction of Trade and Business Public Center. In Kamchatka it was planned to commission in 2007 ahead of schedule the Entertainment Center: modern aqua park with gymnasiums, 25-meter swimming pool and bowling. In Vladivostok it is planned to construct by 2008 the Center of High Technologies of Healthcare.

The Governor of Primorskiy Kray plans also construction of oil processing plant, the biggest in Russia guy-lines bridge, a number of oil pipelines and substations, and some other objects. Among them is "Garden-City" – tourist and recreation zone on the island Russkiy. It is planned to commission "Garden-City" by the beginning of the Asia and Pacific Economic Cooperation Summit in 2012.

Specific features of the HVAC market

The climate market of Far East depends on weather a great deal. If summer is hot, you could see the growth of sales up to 30%, if summer is cold, growth is about 15%. At the same time, if often happens that in the regions with higher salaries nobody needs air conditioners, because it's not very hot. Now in Khabarovsk and Vladivostok the annual level of sales is around 13 thousand splits, in other towns of the region – ten times less. Experts assess the total volume of the market at about 30 thousand splits per year and about 100 VRF systems per year.

Vladivostok is the main consumer of HVAC equipment in the region. The summer peak of temperature (higher than 25C) in Vladivostok lasts usually for one month. So the seasonal peak of sales lasts only for 2-3 weeks in August. During that period there can be a lack of equipment in stocks.

Players of the HVAC market

Total number of HVAC companies at the market of Far East Region is around 1 hundred. Among them are suppliers of equipment, retail nets, installers and chain stores. There are also specialized companies, who only can offer the full spectrum of service: from design and delivery to maintenance.

It's notable, that air conditioners LG are being sold by almost all companies in all regions of Russian Far East. No wonder: Representation of LG Electronics in Vladivostok works for already 11 years. Local company Vladmarket is engaged in supply of air conditioners LG also.

Towns of Far East Region are very far from European Russia, and because of it there dominate local companies, not representatives of Moscow and Saint Petersburg based ones. Leaders of sales of split systems (in different towns) are: Vladmarket, Galanz, Amur-Holod, Vostok Klimat, Dalvent, Global Comfort, Climate Service, Comfort Plus, Konus, MDV, Mir Konditsionerov and Chayka.

The share of trading houses – federal net Eldorado, local Kontur, Narodnaya Kompaniya, Spektr, Domotekhnika and V-Laser – is less than 10% of the total market.

Trading houses don't affect much the business of big specialized companies. Experts are sure that today's customer does not want to buy HVAC equipment in chain stores just because of dumping price and without corresponding service. At the same time companies, which are engaged mainly in retail, believe that chain stores do make the rather uneasy present situation even more difficult, for the demand at HVAC market is very limited.

Many retail companies realize direct delivery of equipment, or buy it at the company Vladmarket. Very actively develops collaboration with companies Ventrade, United Elements, AYaK, Beaufort, Euroclimate, Liga Klimata, Nimal, Hikonix, Fantom-Climate. Increase their activity representations of Moscow based companies – Daichi-Vladivostok and Breez-Khabarovsk. At the market of industrial air conditioners lead the companies with their own design departments and production facilities. In Primorskiy Kray such companies are Konus, Effektovent, and Mir Konditsionerov; in Komsomolsk-na-Amure – Aerovent; in Khabarovsk – Dalvent and MDV.

The following companies have regional store-houses: Carrier and Toshiba at the base of company Konus; Fujitsu, Pioneer and McQuay at the base of United Elements; Rusklimat (MELCO, Midea, Ballu ),and Biocond (MHI) at the base of Opt-Klimat; Haier at the base of company Hladservice.

There is its own local manufacturer of home appliances including air conditioners in Khabarovsk – Group EVGO. Company Vostok-Klimat opened some years ago workshops for production of different types of air ducts in Vladivostok and Nakhodka. In Khabarovsk works representation of the ventilation equipment factory NormalVent.

In some towns of Far East Region work designing companies and institutes Argus-Art (Vladivostok), Khabarovskgrazhdanproekt and others. Leading specialists of designing organizations of the region are united at the Discussion Club Daichi, they hold meetings twice a year.

Main brands of HVAC equipment

In Far East Region are represented practically all main brands of HVAC equipment, and also some not so well-known trade marks. Naturally, from the point of view of quantity there dominate air conditioners made in China.

Room air conditioners AEG, Airwell, Ballu, Beko, Carrier, Chigo, Daewoo, Daikin, DeLonghi, Elenberg, General, Hualing, Kelon, Kentatsu, LG, Mitsubishi Electric, Mitsubishi Heavy, Midea, Panasonic, Pioneer, Polaris, Samsung, Sanyo, Siat, Tadiran, Toshiba, Vitek.

Industrial air conditioners Airset, Daikin, Fujitsu, General, Kentatsu-Stormann, MHI, Midea, Sanyo, Systemair, Ventus.

Multi-zonal systems Daikin, General, Kentatsu, Mitsubishi Heavy, Sanyo, Toshiba.

Chillers and fan-coils Carrier, Daikin, Dunham-Bush, Clivet, McQuay, York.

Ventilation equipment Honeywell, Ostberg, Svegon, Systemair, Korf.

Heat guns and curtains Frico, General, Hintek, LG, Olifeni, Pyrox, Thermoscreens, VEAB, Teplomash, Tropik, Favorit.

Air humidifiers ÀirComfort, Ballu, Bionaire, Boneco Air-O-Swiss, DeLonghi, Elenberg, Vitek. Heaters, convectors and electric fire-places ÀirComfort, Ballu, DeLonghi, General, Global, Nobo, Noirot, Master.

Public events in the region, connected with HVAC business

Asia and Pacific Economic Cooperation Summit is to take place in 2012. Preparation to the summit would influence not only HVAC business, but the whole life of Far East Region. Owing to the summit a significant investment flow into the economy of Vladivostok and all Far East Region is expected. There is also expected a surge of residential construction activity, and fast development of local transportation infrastructure, which include construction of a new bridge over the Zolotoy Rog bay and construction of a top class international airport.

There are regularly hold specialized exhibitions in the region: "Cottage. Country House. Landscaping" in Khabarovsk in the end of February – beginning of March; "Energy and power engineering of Far East Region: transportation, saving, alternative" in Khabarovsk in the second part of May, it includes a special section of heating, ventilation and air conditioning; "Construction" in Vladivostok in September.

Among special events it's reasonable to notice the seminars, which are held before beginning of new seasons by suppliers of equipment: Mitsubishi Heavy Industries, Daichi-Vladivostok and some other. Some companies organize joint advertising and marketing campaigns: Konus (Carrier), Vladmarket (LG), Komfort Plus (General), Akvadom (Ballu), Opt-climat (Mitsubishi Electric). Company Daichi-Vladivostok organizes professional training of installers, service specialists and managers.

VENTUS and Daichi offer bonuses to those designers, who use their equipment. Daichi-Vladivostok jointly with its colleagues from Khabarovsk holds for dealers annual forum "Far Eastern Breeze" with original program and accompanied with banquet.

Prospects and difficulties of HVAC market

There are, surely, common for almost all regions difficulties: low level of technological competence of customers and lack of qualified personnel. But the main factor, which slows down development of HVAC market of Far East, is low level of income of population.

Closeness to China also determines situation at the market, it causes the abundance of cheap Chinese equipment. At the same time, experts say it not only tempers the growth of sales, but it also gives additional possibility for development of maintenance and repair services.

The serious problem is that the price usually determines the results of tenders. It is almost impossible to use modern high-tech systems of heating, ventilation and air conditioning because of it.

Specialists from designing companies also notice that complicated geographical relief and big difference in height seriously influence their work. Absence of big trading and business centers in the region restrains development of the market of central air conditioning systems.

Editors of magazine "The World of Climate" gratefully acknowledge help and assistance of the Specialized Information Project HVACNEWS.RU and the top managers of Far East based HVAC companies:

Serguey Yukish, Group of design and construction companies FS-Group, General Director; OOO Mir Konditsionerov i Inzhenernye Sistemy (Vladivostok), General Director:

- Vladivostok is the most beautiful city in Russia: there are sea, hills, islands. It somehow resembles San Francisco.

Last years the market of climate equipment of Vladivostok and Primorskiy Kray was dull because of lack of attention to the region. Now, when the situation in the country became stable, HVAC business should grow more rapidly and dynamically. There should develop such prospects as using of modern, energy efficient equipment and renewable sources of energy.

Anatoliy Lyaskovskiy, OOO Vladivostokskiy servisniy tsentr CHAYKA, General Director:

- One of specific features of our region is, that resident of Primorskiy Kray, being the citizen of Russia, fell himself being closer to Asia at the same time. China, Japan, Korea are concrete places for us, the places where we can go on business, for shopping or to have a rest. All residents from housewife to director of the company are brought up by Asian market, they clearly understand all its advantages and shortcomings.

Primorskiy Kray developes more slow than Central Russia because of its geographical location. I would like to believe that the policy of Government would allow the region to work and develop, that Asia and Pacific Economic Cooperation Summit would give an impact to development of Vladivostok, that investments would come to Primorskiy Kray.

Oleg Kostromin, KONUS (Vladivostok), General Director:

- Our company was established in1991 and develops as a full-cycle enterprise. We can offer to our customer the full spectrum of service: from design to maintenance.

Knowing the trends of development of the market of climate equipment today, I can say with sure that energy saving technologies and technologies of air treatment is the future of the market.

Alexey Lutsenko, Climate-Service (Khabarovsk), Director:

-Presence in the region of trade nets and delivery cheap equipment from China limit sales, but help to develop service. It's difficult to predict something, but we hope that construction of residential and office buildings would expand. Owners of new premises are the main buyers of HVAC equipment.

Vladimir Prokurov, Designing Company ARGUS-ART (Vladivostok), Director:

- Our city is very special: the place where it stands has s very complicated relief, weather is unpredictable, income level of population is low (comparatively with Central Russia). There are only a small number of corporative offices and trade centers, where central air conditioning systems could be installed.

Roman Bogatyrev, OOO Microclimate (Nakhodka), Director:

The main disadvantage of Nakhodka is low buying capacity of population and commercial organizations, as compared with the regional average.

Among new prospective equipment I would like to note solar collectors; defrosting systems for roofs, buildings, open grounds and pipelines; and also introduction of central air conditioning systems and air heating systems.

Konstantin Zubkov, AHI (representation of Carrier and Toshiba Carrier Corp), Marketing Manager:

Far East is one of the most interesting prospective markets for the company AHI. Volume of sales of equipment Toshiba and Carrier in Far East Region increases from year to year. And this sales growth is not only in the segments of room and commercial split systems, but also in the segments of VRF and chiller – fan-coil systems. For instance, it was Vladivostok, where the biggest in Russia project with installation of three-tube VRF system Toshiba and heat recuperation was fulfilled.

One of the most serious difficulty is that Far East Region is far from the European part of Russia, where many manufacturers have their buffer stores. In another words, equipment from Japan and countries of South East Asia first goes to the West, then to stores in Moscow, and only then is delivered from Moscow to Vladivostok and Khabarovsk. It seriously affects time of delivery and price. Our neighborhood with Chine surely influences the market in general, but it has little effect on development of upper and middle price segment brands. At the same time leading Japanese manufacturers by any means try prevent delivery of equipment, intended for internal market of China, to Russian Far East.

No doubt, HVAC market of Far East Region has very good prospects of growing. The thing we are glad most of all, is that local companies who work with our equipment, are aspired to apply new, more interesting technologically and more efficient engineering decisions.