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Chinese Appliance Suppliers Facing Major Problems

Some of Australia’s largest Chinese appliance Companies are facing mounting supply problems with swollen inventories causing problems.

Chinese brands such as Haier, Hisense, Changhong or Chic as they like to be known as well as Gree and Midea, have seen inventories soar to over 15% to US$14 billion as retailers cut back orders due to falling sales, also impacting the business is falling domestic sales in China.

The problem is caused by weak consumer spending triggered by the pandemic that has swollen inventories at Chinese home appliance manufacturers to breaking point with insiders tipping massive price falls in an effort to clear a backlog of stock.

In some Companies inventory shot up 28% with manufacturers of house brand appliances to the likes of Aldi, Big W and Bunnings now facing serious problems.

At the same time stock levels at retailers has also risen.

Nikkei Asia claims that an inventory turnover period of 81 days is now normal at some retailers, this is 50% longer than three years earlier.

In China retailers that did their part to discount products were rewarded with new products at reduced wholesale prices, but this failed to clear stock.

Chinese retail sales of appliances dropped 9% on the year to 338.9 billion yuan in the first half, according to data provider All View Cloud.

“Foreign retailers such as Harvey Norman, JB Hi Fi and The Good Guys are now in an excellent position to negotiate better pricing” claims one Chinese manufacturer at the IFA trade show in Berlin.

Midea who have made several attempts to break into the Australian market, is also undergoing turbulence. The company plans to part with 30% of their contracted distributors, according to a May report in The Beijing News, which cited a Midea employee.

Seeing the writing on the wall, Midea and Gree have allocated resources to renewable energy businesses, such as storage batteries. TCL and Haier look to maintain growth by developing overseas markets.

Depending on the speed of the market fallout, the major home appliance players may have to shed operations, staff, and distribution contracts.

Impairment losses associated with excess inventories would cut deeper into earnings claims Nikki Asia.



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