HVAC market of Nizhniy Novgorod

Editors of magazine “The World of Climate”
together with the information agency HVACNEWS start the new column – Regional
Markets. Here you would find comprehensive information about developement of the
climat business in the main regions of Russia. Our first material is about the region of
Nizhniy Novgorod.

According to the agency “Litvinchuk-Marketing”,
the share of city of Nizhniy
Novgorod in the market of split-systems of the whole
Volga region, is about 11%. For
Russia it is the market of the medium
developement. Dynamic of sales in the market (in outdoor units) is the
following: 1999 – 2200 units, 2000 – 3800 units, 2001 – 4800 units, 2002 – 7000
units, 2003 – 6600 units, 2004 – 6200 units and 2005 – 7600 units. According to
the infotmation from the companies of Nizhniy Novgorod, sales in 2005 were about
8-9 thousand units. Sales of the central AC and ventilation systems in Nizhniy
Novgorod make 13% of the market of Volga Region, they reached in 2002 –
6,1million euro, in 2003 – 7,3 millon euro, in 2004 – 8,6 millon euro, in 2005 –
around 10 millon euro.

Distinctive Features of the Region

The region has some distinctive features which
influence the developement of local HVAC business.

Average personal income of population is rather
low (4,5 times less than in Moscow and 1,5 times less than in Samara and
Ekaterinburg). Summer is short and not very hot. Because of it AC systems are
not the utility of the first priority in Nizhniy Novgorod.

At the same time the flaw of Russian and
foreign investments in to Nizhniy Novgorod significantly increased since 2005.
The beginning of the mass building construction in the region is planned for
2007. The short-time plans include construction of hotels for about 2240
visitors, ten centers of trade and entertainment and some big business-centers
only in Nizhniy Novgorod. In the region of Nizhniy Novgorod actively goes on the
reconstruction of industrial facilities and gains momentum the individual
housing construction. So the possibilities for dynamic developement of the
climat market are formed.

Nizhniy Novgorod is situated very well from the
point of view of logistics. It is located on the intersection of the main
transportation arteries. Dencity of the rail-road net is 3,3 times higher than
the Russian average. No wonder that many regional players on the climat market
organized their distribution centers in Nizhniy Novgorod.

One spesific feature of the region more, is its
high scientific potential. There is the “Academy of Architecture and Construction of Nizhniy
Novgorod” which prepare engineers with specialization “Heating and Ventilation”
among others. Qualified specialists come to the climate business also from the
military industry. All this allows the HVAC companies of Nizhniy Novgorod to
undertake very complex projects themselves. Company “Elite” for instance, installed there the first in
Russia system of remote control DS-Net
(Daikin).

Participants of the Climat Market of Nizhniy Novgorod

There are about 75 companies in the climat
market of Nizhniy Novgorod today (in 1998 there were 30 companies). The majority
of them work with individual customers mainly. Usually not more than 20
specialized companies take part in serious tenders.

Many Russian and international distributors of
HVAC equipment have their representative offices and actively work in Nizhniy Novgorod:
“Daichi” (for more than 6 years), “Rusclimat”, “Biocond”,
“Veza” (without stock facilities), “Lissant” (has stock facilities), “Sovplim”
(without stock facilities), “YORK” (Moscow representative office),
“Remak” (started in 2006, without stock facilities), “VTS” (without stock facilities), “AYAK”, “Elite” (has
stock facilities), “Teplomash” (has stock
facilities).

The design of some projects is carried out by
“NizhegorodNIIgrazhdanproyekt” and “Promstroyproyekt”, companies well-known since the
Soviet period. However, the majority of new projects are designed by the
departments of design of specialized HVAC companies. These departments are often
engaged in architectural and construction design also.

Trade networks “M-Video” and “Eldorado” do not
have a substantial share in sales and according to local professionals “don't
make a lot of harm on the market”. “M-Video” sells equipment of Daewoo, Samsung,
Panasonic, Sharp, Daikin and the most recent Bork
(Germany). “Eldorado” traditionly offers
LG, Samsung è Panasonic.

The most special feature of Nizhniy Novgorod is
the presence there of big Russian manufacturers of the climate equipment. Among
them are: “Evan” (electric boilers and water
heaters); “Provento” (ventilation systems,
air-ducts, electric distribution boards); “Klimatechnika” (convectors “Komfort” and “Universal”; air-heating equipment, electric heating
and ventilation equipment, industrial air heat curtains); “Termal” (electric heating elements, air and water
heaters); “Ozon” (aircleaners “Puma”); “Klimat-kontrol” (design and production of
low-temperature blocks for conditioners);
OAO“Teploobmennik” (air-conditioning
systems for aircraft).

In 2006 APIC opened its branch in Nizhniy
Novgorod. The initiative was put forward by companies “Elite”, Ventcenter”
and “Dzerzhinskpromventiliatsiya”. The main aim
of the branch is to develope the HVAC business in the region, implantation of
civilized ways of doing business, introduction and promotion of new products and
latest technoligy, protection of the interests of distributors and wholesalers
of HVAC equipment.

Main Brands of Climat Equipment in Nizhniy Novgorod

According to the estimation of the local
representatives of the climat business, the following brands are the most
popular in the region:

RAC – Daikin, MHI, Melco, MñQuay, Samsung, LG, Toshiba, Gree,
General, Fuji;

PAC – Daikin, MHI, Melco, Fujitsu,
York;

multizonal systems – Daikin, MHI;

chillers and fancoils – Trane, Clivet, Blue
Box, Uniflair, Airwell;

ventilation equipment –
Rosenberg, Swegon, Remak, Korf, Systemair,
Veza, Ostberg, Rover;

heaters, convectors, electric fire-places –
Nobo, Noirot;

heat curtains – “Teplomash”, “Tropik”,
Olefini, Makar, Master;

air moisturizers – Boneco;

air cleaners – Daikin.

Advertising and Marketing

Citizens of Nizhniy Novgorod called the
advertising campaigns of Kentatsu and Panasonic the most colourful ones among
the PR-actions of the last year on the local HVAC market.

Annualy in April – May, manufacturers and
distributors of the climat equipment hold seminars for local installers and
designers. In 2006 were held seminars about equipment of Remak and VTS Klima.
Company “Evroklimat” held a conference for
dealers in Nizhniy Novgorod. Company “Daichi” regularly holds DDC club for
designers, and organizes trainings on design and installation of equipment of
Daikin. In May traditionaly takes place the Russian Forum of Architecture and
Construction, one section of it specializes on HVAC systems. In autumn is held
the construction forum “From Design to Finishing”, in which the climat subject
is also presented.

According to the reaction of local mass-media,
the most signeficant event of 2006 from the information point of view was the
press-conference held because of the openning of the APIC branch in Nizhniy
Novgorod. There were more than 20 publications, many reports and special
programms on radio and TV.

DIFFICULTIES FOR HVAC BUSINESS IN THE REGION

Representatives of local companies say that
there are 3 main issues to care about: customers do not have enough information
about HVAC equipment; there are too many people with poor qualification in the
market; the lack of qualified professionals. These shortcommings, by the way,
are usual for the majority of regional Russian HVAC
markets.

TRENDS OF THE REGIONAL CLIMAT BUSINESS

People of Nizhniy Novgorod say: «We move
steadily towards civilized market”. This movement started in 1999 when company
“Elite” entered APIC, accelerated in 2000 with creation of company “Daichi-NN”
and gained momentum in 2006 with the openning of the Branch of APIC in Nizhniy
Novgorod.

Now the steady increase in demand for HVAC
equipment and service is evident in the region. First of all it concerns the
segments of office buildings, commercial and entertainment centers, industrial
installations and luxury housing. The requipements for operating cost are
getting more tough, and it causes a growth in demand for regular service and
energy-efficient equipment and design. The interest to electro-mechanical
ventilation systems also grows because of wide-spred use of plastic window
frames and additional facing of fasades. There is an active development of the
systems of “smart house”. Business center “Teledom” and the building of company
“Verhnevolzhsknefteprovod” are already equipped with this system,
commercial-entertaining center “MEGA” is in process.

Editors of first of all the magazine “The World
of Climat” aknowledge the help and assistance of the leaders of the Nizhniy
Novgorod based companies – members of APIC:

Alexey Savostikov, Chairman of the Board of
Directors of OOO “Group of Companies Elite”
(city of Nizhniy
Novgorod). “Our company offers to our customers the
complex solution in the systems of air-conditioning, ventilation, heating and
water supply – from design to service and maintanance. Among the main fields of
our activity is the design of civil installations, and much
more…”.

Eduard Orlov, Director of OOO “Dzerzhinskpromventiliatsya” (town of
Dzerzhinsk). “The number of the enterprises of
chemical industry per the unit of square makes the town of
Dzerzhinsk the real Capital of Russian
Chemical Industry. I would like to note that it was our company who carried out
installation of the ventilation and air-conditioning equipment at all chemical
enterprises of Dzerzhinsk…”.

Mikhail Kuzmin, Director of OOO “Venttsentr PSK” (city of
Nizhniy
Novgorod). “We have our own facilities for production
of the components of ventilation equipment. It allows us to guarantee not only
the minimum time and high quality of installation works, but also the optimal
price…”.

Alla Gladkaya, Executive Director of NRO APIC
(city of Nizhniy
Novgorod). “The regional representative office of APIC
is oriented to settle the vital issues of the climat business in the region and
to increase the quality of serving the customers. The APIC members bear the
joint responsibility before customers, guarantee the quality of equipment, works
and sevices. They have all necessary licences and
certificates”.

The Opinion of Expert

Georgiy Litvinchuk, Director of the company
“Litvinchuk Marketing”

In the climatic area where Nizhniy Novgorod is
situated, air-conditioner is not the thing of high priority. Air-conditioners
are installed mainly in offices. The use of conditioners in the living sector is
not wide-spread, and there is no prospective that the situation changes in the
nearest future. The potential of the market of split systems in the city of
Nizhniy
Novgorod and the region is 12000-15000 units per
year.

If compared with other big subdivisions of
Volga Federal District, the region of Nizhniy Novgorod is behind the Samara
region, Bashkiriya and Tatarstan in the taxation base, and less in the income
level. At the same time Nizhniy Novgorod has become the capital of Volga Federal
District, and this fact gave some impact to the developement of HVAC market.
Many serious “unplanned” objects were additionly equipped with air-conditioning
systems within last two years.

There are many good engineering companies in
Nizhniy Novgorod, the level of the climat professionals there is rather high as
far as Russia is conserned. So, the most advanced
climat technologies are actively introduced in Nizhniy Novgorod. It was Nizhniy
Novgorod, where the first in Russia VRF-system was installed. The ratio
of combined extract-and-input systems with heat recuperation in use is the
highest in Russia. It is the achievement mainly of
professionalism of sellers, who could push the customers ahead to advanced
solution. The biggest in Russia manufacturer of air-ducts, company
“Provento”, is situated also in Nizhniy
Novgorod.

The main players in the regional HVAC market
are: “Elite”, “Venttsenter”, “Ventservice”, “Daichi-NN”, “Dzerzhinskpromventiliatsiya”, PG “Ozon”, “Provento”,
“Techno Test”.