Inflationary pressures have been present in the appliances industry since late 2020. Production capacity challenges include labour shortages, persistent semiconductor shortages and elevated commodity prices. In 2022, inflationary pressures will come from a new front, with reductions in production expected to result from lockdowns in China. In the long run, inflation in the appliances market could prove to be persistent.
This report comes in PPT.
Historical findings have shown that inflation in appliances is sticky. Evidence in the US market shows that previous price increases during inflationary periods are not reversed completely once inflation reduces. A minimum increase of 20-30% usually remains for major appliances; however, it should be noted that this was before the period of hyper-efficient globalised supply chains, which have tended to dampen inflation.
High prices of commodities will continue to drive inflation well into 2023. Another significant driver of inflation will continue to be the semiconductor shortage, which has led to companies focusing on higher margin products. This shortage has been exacerbated by a shortage of gases used for chip manufacturing, such as argon and xenon, because of the war in Ukraine. The chip shortage is expected to last until 2024.
High prices of commodities have led to companies redesigning some of their products. Copper accounts for 20-30% of inputs costs for air conditioners, and high copper prices have led to companies such as Daikin replacing copper with aluminium in their products. Engineering plastics from DuPont could also prove suitable replacements for expensive metal alloys.
E-commerce companies have played a role in negating inflation in many industries. In 2021, both JD and Tmall, in partnership with major appliance brands, conducted campaigns with promises of CNY10 billion in rebates. Similar campaigns globally may prove to be one of the few deflationary factors in the current environment.
Consumer Appliances is the aggregation of major appliances and small appliances. Major appliances are an aggregate of the following categories: refrigeration appliances, home laundry appliances, dishwashers, large cooking appliances and microwaves. Small appliances are an aggregation of the following categories: food preparation appliances, small cooking appliances, vacuum cleaners, irons, personal care appliances, heating appliances and air treatment appliances.See All of Our Definitions
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