China's household appliances are increasing investment in mid- and high-end products instead of engaging in another price war.
With the price rises in raw materials and the government's requirement of energy labels for household appliances in 2005, the manufacturers have stopped trying to under-price the competition and focused on developing products to win back the declining the market shares.
In 2005 the cost of making an air conditioner will be up 20 percent as raw material costs make up one-third of the total cost. The iron and steel price has risen 70 percent this year compared with the price in October 2004. The price of plastics is up 73.9 percent, galvanization plate is up 39 percent, and copper is up 1,600 yuan (approx. U.S. $180) per ton.
As the season for selling air conditioners is drawing near both domestic and overseas producers have worked to increase their sale prices. According to the report, majority of some 40 new kinds of LG air conditioners that target Chinese consumers this year are high-end and new products.
Despite the price increase, industry insiders predicted the overall price of household appliances will remain comparatively low this year, because of the large stockpiles of products after domestic makers expanded their production last year.
Price war played a vital role in the growth of China's household appliances industry. The competition reduced the prices of the products to the benefit of consumers. Meanwhile, it cut companies' profits and made it hard for them to develop high-end and new products. (Xinhuanet, China View)
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