Summer 2010: experts’ experience

Nikolai Miluchikhin, Director for Conditioning of Mitsubishi Electric Europe B.V. :

“This season will be remembered not only as good one, thanks to high earnings, but also as a very bad one – due to the unbelievable number of “crooked” installations and, as a consequence, due to the large number of equipment failures. At that, while the money was earned by unqualified installers, it will be suppliers, including representative offices and distributors, who will be liable to clients for those failures. I suppose that without due legal, technical, and administrative procedures being developed, the professional HVAC companies are likely to face a flow of lawsuits next summer.

I know that this issue was already raised among APIC members. Anyway, I would suggest distributors and manufacturers, who are likely to be left holding the baby in this situation, pay special attention to this issue.”

Alexey Shabliy, General Director of Cherbrooke:

“It’s not the time to summarize yet; however, I would estimate the overall sales volume of split systems in Russia in this season to be about 1 million sets. After 30% fall in sales in 2009 as compared to 2008, a challenging, but justified by a number of meaningful measures, task of exceeding 2008 sales volume by at least 15% was set for 2010 – and it seems that this objective is being achieved. Usually, the demand DROP significantly by the end of July. But this season is different – it’s August already, however, the demand for equipment is still rising. Previously the queue for installation was up to the end of August; this year it stretches all the way down to the end of September.

So, what are the causes of this year’s turmoil? Of course, the first cause is the abnormal heat. Air conditioner suppliers could not expect this. Despite the signs of the improving economic situation, in 2009 they ordered quantities than for the season of 2008. That cautiousness was also backed up by the lack of clarity regarding the rules of import of R22-based air conditioners to EU and Russia and by the uncertainty in new customs regulations as well. For instance, due to Finland’s unexpected decision to prohibit R22 transit, may suppliers had to re-direct promptly a huge number of containers to Russian ports which led to delivery delays and increased cost prices for air conditioners.

As to the actions of anti-monopoly authorities… In my opinion, FAS has no legitimate reasons to take any measures for regulating prices for HVAC equipment. No price collusion or artificial deficit are possible in our business, and there are absolutely obvious reasons for that: there is no natural monopoly in this segment; conversely, there is intense competition due to the huge number of brands, suppliers, distributors, and installation organizations who take all measures possible to sell the season articles as soon as possible and to minimize their stocks by autumn.”

Konstantin Frishberg, Head of Refrigerator and Air Conditioning Group of Domestic Appliances Department at Samsung Electronics RUS Co:

“According to my own estimates, the growth of Samsung’s air conditioners sales to end-users will double; however, it should be noted that the year of 2009 was very unsuccessful. The main issue of the present season is equipment deficit seen in July.

The most urgent issues of this market are, in the first place, the issue of R22, which now remains very unclear, and, in the second place, some negative consequences of the speculative demand in 2010. Any extreme fluctuations at any market, all the more so for ours, rather specific, market, are very undesirable. It turns out, that during 3 consecutive years we have been dealing with a number of factors which destabilized the market. In 2008 and 2009 that was extremely negative influence, while in 2010 it was extremely positive. Obviously, due to the deferred demand formed in 2008 and 2009, as well as improved economic situation and hot summer with all those fires, the demand will continue growing in 2011 . The question is – by how much? I’m afraid that too optimistic attitudes may lead to high market overstocking by the beginning of 2011 season, and, as a consequence, price erosion. I think, that both vendors and distributors, as well as retail channels should thoughtfully and carefully plan import for the next season.”

A. Gladyshev, Director of Sales Department of Ventcor company:

“The season of 2010 appears to be the last season of large-scale sales of R22-based equipment. Difficulties in transporting through European Union, price increase for the refrigerant at the domestic market, and minimum difference between producer’s prices for R22-based and R410A-based models make delivery and sales of R22 economically inexpedient. 2011 is to become the year of market transition to R410A, with expected price growth by 10-15%. Our company is already working actively with equipment manufacturers on the introduction of new model lines based on R410A with the minimum possible price difference as compared to the “old” equipment.

In the next season the most important issue for any distributor will be maintenance and extension of regional network, respectful attitude to all customers with no exception, adequate and balanced model range at stock, and flexible price policy at transition to R410A-based equipment. Russia’s market has not exhausted its growth opportunities and, in our view, the tendency of situation improving in the industry is obvious. In 2011 we will be glad to see as our partners all HVAC companies interested in high-quality and well-organized work with suppliers.”

Elena Kholopenko, Sales Department Administrator of Trane Technologies:

“As a result of 7 months of the current year the volume of orders of Trane industrial air conditioning systems exceeded the volume for the same period of 2009 by 30%; this was mainly thanks to several large-scale (mainly industrial) projects. Despite such a positive result, only some trends for improving at the construction market and industrial air conditioning and ventilation systems market are seen. Some large-scale projects remain blocked; activity level at the market of office and trade premises construction in such regions as Saint Petersburg is almost zero, and all Trane’s projects in this region are limited to medium- and small-scale industrial projects. The situation is much better in Moscow, however, the small number of new projects in 2009-2010 (speaking not only about Trane but about the construction market as a whole) means that, for industrial air conditioning systems market, the end of 2010 can be somewhat worse than the first six months. Speaking of forecasts of industrial air conditioning systems market development in 2011, one may, basing on the realistic trends, expect 3-5% market growth as compared to 2010.”

V. Murashko, General Director of EUROCLIMAT.REGION company:

“The season of 2010 is very complex, nervous, hot, and long. The year started with complete mess caused by new rules of R22-based air conditioners import. At that, the situation was aggravated by the fact that the larger share of the planned import for 2010 included this type of equipment. It’s the end of the summer now, however, there is still no complete clarity in the issue of R22-based air conditioners import in the next year. Even information from official sources is discrepant. Considering this we are going to order ozone-safe refrigerant-based equipment only.

Neither sellers nor purchasers need to be told about how the weather in the central part of Russia affected HVAC business. Already in August we exceeded sales volumes of the most successful 2007.

Will the speculative demand for air conditioners seen during this summer affect sales in 2011? Sure! From now, it will be easier for salesmen to urge customers to purchase air conditioners before summer, just to be on the safe side. “What if it’s hot again!”

As to the perspectives, it have become evident that the time when air-conditioners cost cheaper than mobile phones is ending. While retail prices in 2010 rose due to the summer deficit, price growth for air conditioners will have new drivers in 2011. Analyzing market “indicators” we can see that the time when “Chinese” meant “cheap” is likely to end next year when technology intensive Chinese goods will become more expensive. Firs “bells” have already rung: strikes of workers demanding salary increase at Chinese automobile assembly plants; Yuan growth again; rise in prices for copper and other materials used in air conditioner manufacture.

Among other trends important for the industry one may name the increase of inverter air conditioners share and large-scale transfer of distributors to deliveries of R410A-based air conditioners. However, quite possibly we may soon find out that this refrigerant is not so good – only this time because of its greenhouse effect – and it will be replaced by new refrigerants, for example, by “Genetron Performax LT” or some other. This will mean the beginning of the next stage of re-equipping and upgrade of the whole world’s refrigeration and air conditioning industry.

Another trend: in addition to professional HVAC companies and retail chains, a third player is expanding its presence at the market of air conditioners – web-stores. This format is very attractive for consumers, however, many of those web-stores cannot ensure high-quality installation of air conditioners, provide technical support, or fulfill warranty obligations. That is why our professional association, APIC, will have to perform active explanatory work in this field.”

Veronika Silvestrova, Commercial Director of CLIVET’s Representative Office in Russia:

“Despite all the difficulties related to the crisis period we increased our turnover by more than 40% as compared to 2009. 2010 is the year of active phase of the State Programme for construction of medical facilities across Russia. Due to this we notice greater demand for central air conditioners for medical facilities.

Also one can note the increased interest to energy-efficient systems, to the use of renewable energy sources in refrigeration equipment (geothermal energy, sun energy). Solutions based on “water loop” system, water source systems, or SPINSaver outline clearly the direction of future development and even today such systems allow their users save considerable amounts of money during operation.”

Full versions of expert evaluations can be found at: /marketing/

The article was prepared by “Climate World” magazine editorial office