The Chinese household air conditioning industry began 2026 with a cold start, showing a decline in both production and sales. According to industry data, from January to February this year, cumulative domestic production of household air conditioners was 32.824 million units, down 1.9% year-on-year, while cumulative sales reached 33.32 million units, a decrease of 3.5%. Exports accounted for 19.253 million units and domestic sales for 14.067 million units, both falling by 3.5%. As a core category in the home appliance sector, the performance of air conditioners directly reflects the overall market vitality.
At the industry level, multiple factors are converging to stifle growth, including pressure from a high base, volatile raw material prices, weak end-user demand, and expectations of policy support tapering off.
The industry's challenges are becoming more pronounced. The air conditioning sector has long experienced cyclical "good and bad years," and 2026 finds itself in an adjustment period following a high base. In 2025, spurred by factors such as high temperatures and government trade-in policies, the industry saw phased growth in both production and sales, which now pressures 2026's performance.
The most direct pressure stems from persistently weak end-user demand. In recent years, industry growth heavily relied on emergency demand from heatwaves and replacement demand stimulated by policies. Now, both supporting forces are waning. From the real estate perspective, a continuous decline in completed construction areas has directly reduced new demand for air conditioners. As a product closely tied to housing completion, reduced new home deliveries naturally lead to fewer new installations. Furthermore, with air conditioners typically having a replacement cycle of 5-10 years, the previous policy stimulus and demand release have led to a phase of saturation in replacement needs. Coupled with macroeconomic fluctuations dampening consumer willingness to spend, end-market demand is insufficient, increasing inventory pressure for manufacturers.
Simultaneously, expectations of a tapering in the "trade-in" policy add further uncertainty. Previously, policy incentives were a crucial lever for boosting consumption. As these supports diminish, companies must confront weakening demand alone. Managing high channel inventory has become a critical challenge for all players. Some distributors reveal that inventory turnover days for many brands now exceed 60 days, with some smaller brands surpassing 90 days. This inventory pressure has already impacted production, contributing to the output decline at the year's start.
Persistently high and volatile raw material costs are further squeezing profit margins. Key materials like copper and steel, particularly copper price fluctuations, significantly impact gross margins. Since the beginning of 2026, the central price of copper has trended upwards, compounded by the effect of a strengthening Renminbi, increasing cost pressures. For smaller brands with weaker pricing power, rising costs cannot be fully passed on to consumers through price hikes. Some companies are even facing losses on each unit sold.
Additionally, product homogenization and intense competition are becoming more severe. Most technological innovations are concentrated in niche areas like "fresh air" systems and "smart" features, lacking revolutionary breakthroughs. Core functionalities and designs across brands are largely similar. To capture market share, price competition is rampant, with promotions and discounts becoming the norm both online and offline. This further compresses industry-wide profit margins, trapping companies in a cycle of revenue growth without corresponding profit increases.
As domestic competition intensifies, overseas markets represent a potential new growth frontier. However, high shipping costs, frequent geopolitical risks, and the rising market share of local brands abroad are making international expansion challenging for Chinese air conditioner manufacturers.
Under these combined pressures, growth anxiety within the industry is palpable. This anxiety is not uniform; companies across different tiers and with varying strategies face distinct challenges. Leading companies like Midea, Gree, and Aux each confront their own difficulties, reflecting the broader industry landscape.
The leading players each have their specific hurdles. Midea, a domestic appliance giant, holds a significant scale advantage in air conditioners, consistently leading in production, sales, and market share. Yet, even Midea is not immune to the 2026 industry headwinds. High copper prices and Renminbi appreciation mean that despite Midea's relatively strong ability to pass on costs, end-price increases cannot fully offset rising expenses. Midea's Q3 2025 report showed revenue of 364.716 billion yuan and net profit attributable to shareholders of 37.883 billion yuan, maintaining overall growth. However, by Q3 2025, revenue growth slowed to 9.9%, and net profit growth dropped to 8.9%. The gross margin for the first three quarters was 25.87%, down 3.3 percentage points year-on-year. Analysts also point to challenges in Midea's smart and premiumization transformation, with its fresh air and smart air conditioners receiving a tepid market response amid fierce high-end competition, limiting differentiation. Furthermore, consumer feedback platforms show numerous complaints regarding product quality, delivery delays, subpar installation, and poor after-sales service for the Midea brand.
In contrast to Midea's diversified portfolio, Gree Electric Appliances,Inc.Of Zhuhai derives over 70% of its revenue from air conditioners. This heavy reliance on a single category makes it particularly vulnerable during industry downturns. The real estate slump reduces new demand, and Gree's smaller market share in categories like refrigerators and washing machines offers little risk mitigation. Although Gree is investing in industrial products, green energy, and smart equipment, these diversified businesses remain relatively small and have yet to form a substantial "second growth curve." Gree's Q3 2025 report indicated revenue of 137.654 billion yuan for the first three quarters, down 6.5% year-on-year, with net profit falling 2.27% to 21.461 billion yuan. Notably, in Q3 alone, revenue dropped 15.09% to 39.855 billion yuan, and net profit decreased 9.92% to 7.049 billion yuan. Among the top three white goods giants, Gree was the only one to see both revenue and profit decline in the first three quarters of 2025. Public disputes between Gree and Xiaomi management over market share rankings highlight the intense competition for份额. Gree faces sustained pressure from Midea while also contending with emerging brands like Xiaomi, which use high-value strategies to gain online market share rapidly.
As a second-tier leader, Aux previously captured the mid-to-low-end market with low-price strategies. However, in 2026, it grapples with stalled scale expansion, profit pressure, and challenges in brand upgrading. Aux预计2025 revenue to be approximately 30 billion yuan, only a slight increase from 29.759 billion yuan in 2024, while profit attributable to owners is预计 to fall about 24.4% to 2.2 billion yuan from 2.91 billion yuan. Aux attributes the profit decline to rising material costs, high channel inventory levels, and weak consumer demand, which intensifies domestic competition and puts downward pressure on prices, reducing gross margins. Recent attempts at brand upgrading and launching premium products have met with limited market success due to insufficient brand influence, preventing a simultaneous increase in volume and price. Meanwhile, competition in the mid-to-low-end segment has intensified, with cross-sector players like Xiaomi further squeezing Aux's market space and eroding its historical advantages.
In conclusion, the dual decline in production and sales at the start of 2026 is a snapshot of the air conditioning industry's challenges. The triple pressures of a high base, high costs, and low demand have created a growth bottleneck. Problems like product homogenization, lagging channel transformation, and overseas risks exacerbate the industry's anxiety. Long-term, smart technology, premiumization, and globalization remain key directions. In the short term, companies cannot avoid these difficulties and must find ways to break through, shed path dependency, and build core competitiveness. Competition has shifted from scale to a comprehensive contest involving quality, technology, brand, and channels. Only those enterprises that can swiftly adjust strategies, focus on building core strengths, and adapt to industry changes will secure their position and achieve sustainable development in the long run.
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