Forbes has reported that China is facing price pressures in an industrial segment where it has long acted as a stabilizer, helping to keep white goods affordable worldwide. Meanwhile we do not necessarily agree with this assessment, more that China has simply been used as a cheap and, often poor quality, manufacturing base.
However, the report continues with stating that rising costs for labor and raw materials, in particular, plastics and iron ore are, along with other developments, forcing the largest Chinese home appliances manufacturer, the Haier Group to raise retail prices for all its major home products, mainly refrigerators and washing machines, by between 7% and 10%. Along with air conditioners, these white goods are Haier’s top-selling items in its domestic market, all with more than a 30% market share, a level higher than its market share of about a quarter in the home appliances category overall.
Haier is now the world’s fourth-largest white goods producer by volume and its products are widely available in the top 10 retail chains in the United States, among them Wal-Mart, Sears and Home Depot in the US. They are also sold in 12 of the top 15 chain stores in Europe, such as Kesa Electricals (Comet in the UK), Media Markt and Carrefour.
News of the impending price hike was revealed on Thursday by the Shanghai-based National Business Daily, confirming weeks of speculation. The paper quoted a notice sent by Haier to the leading electronics outlet in Shanghai, Suning Appliance Co., requesting a price increase covering almost all white goods effective Friday. Washing machines would see the largest rise.
The notice cited the reasons behind the move as rising logistics and transport costs owing to high fuel prices, rising labor costs and more stringent government product standards. In addition, it made reference to a laundry list of other concerns such as higher materials and design costs.
The price rise by Haier follows a similar move in January by Siemens , part of the BSH Group to raise retail prices of its appliances in China by 5%. Other smaller producers are expected to follow this lead but China’s surplus production capacity at the lower end of the market should provide a brake on discretionary pricing.
