[Tech Observer] The "trade-in" program is considered a booster for the current recovery of the home appliance industry. Currently, some regions have introduced corresponding supporting policies, and some companies have launched corporate versions of the trade-in program. However, as the policies and measures have just been implemented recently, the overall effect is still under observation.
Tech website Ding noticed that recently, household appliance giants Gree and Midea have successively announced significant investments to promote large-scale trade-in programs. On April 28, Gree Electric announced that it would invest 3 billion yuan to kick off a trade-in program for household appliances. On April 30, Midea Group stated that, in order to strengthen the implementation of the national "dual carbon" strategy and respond to the "Promotion Plan for Large-Scale Equipment Updates and Trade-Ins for Consumer Goods," it plans to invest 8 billion yuan to vigorously promote trade-ins and equipment updates for all brands and product categories.
Although e-commerce platforms like JD.com and Suning, as well as many home appliance companies, have expressed their willingness to participate in the old-for-new trade-in program, giants like Gree and Midea have yet to offer billions of dollars in incentives for such activities. So, why are Gree and Midea so enthusiastic about the old-for-new trade-in program?
According to Ding Tech, the business structure of the two giants plays a significant role. Based on the 2023 financial reports, Gree Electric's air conditioning revenue of 151.2 billion yuan accounts for 74.14%, while Midea Group's HVAC revenue of 161.1 billion yuan accounts for 43.31%, with air conditioning being their largest business segment.
Ding Tech's research indicates that the current policy of trading in old appliances for new ones has a greater impact on air conditioning consumption. This is because the recycling prices for air conditioners have a significant advantage over other electrical appliances. Currently, the recycling price for household air conditioners is mostly between 500-1000 yuan, while ordinary refrigerators, washing machines, and LCD TVs fetch only around 100 yuan, and even smaller appliances like microwaves and rice cookers are recycled for less than 30 yuan.
Data from Aowei Cloud shows that in the first quarter, the average prices of Midea and Gree air conditioning products online were 3680 yuan and 3845 yuan respectively, while most second-tier brands were priced around 2500 yuan. Therefore, for consumers, purchasing new air conditioners through trade-in programs results in significantly lower costs.
Moreover, the second quarter is the peak season for air conditioner sales, with many consumers having the need to buy air conditioners. If manufacturers offer higher subsidies, the cost of upgrading to new units will further decrease, providing a significant incentive for users who have been waiting to make a purchase.
Hence, Midea and Gree, with air conditioning as their core business segment, will proactively invest billions to implement trade-in programs to boost sales during the peak season and increase sales volume. On the other hand, for other home appliance brands where air conditioning does not make up a large portion of their business, there is less motivation to offer substantial subsidies to consumers. (Observation by Ding Tech, reprinted must indicate the source: Ding Tech)
