In the final week of October, three major home appliance giants—Midea, Haier, and Gree Electric Appliances, Inc. of Zhuhai—released their third-quarter financial reports for the year. While the other two companies maintained overall growth, Gree Electric's performance decelerated sharply, with significant declines in both revenue and net profit for the quarter, exposing the company's internal and external challenges as if it had entered "winter" prematurely.
**Declines in Revenue and Profit** For the first three quarters of the year, Gree Electric reported revenue of 137.18 billion yuan, down 6.5% year-on-year, and net profit attributable to shareholders of 21.46 billion yuan, a 2.27% decline. Non-GAAP net profit also fell by 2.73%. In the third quarter alone, revenue dropped 15.09% to 39.86 billion yuan, while net profit slid 9.92% to 7.05 billion yuan—both declines far exceeding the overall performance for the first nine months.
Gree Electric remains heavily reliant on its air conditioning business. Although the company did not disclose specific segment revenue in its Q3 report, its first-half results showed that consumer appliances—primarily air conditioners—accounted for 78.38% of total revenue. This means fluctuations in its core business directly impact overall performance.
The air conditioning industry remains in an adjustment phase. Data from AVC indicates persistent downward pressure, with November domestic production orders down 19.8% year-on-year and export orders down 15.7%. September retail sales volume fell 21.2%, with online and offline channels dropping 29% and 38.1%, respectively. The industry faces multiple headwinds, including lingering inventory cycles, a sluggish property market, and weak consumer sentiment, leading to contractions in both demand and production.
Zhang Xinyuan, a research director at Kfounder Think Tank, noted that product homogenization in the air conditioning sector is a major issue. Recent technological innovations have failed to resonate clearly with consumers, intensifying competition and complicating purchasing decisions.
From 2021 to 2024, Gree Electric consistently posted growth in net profit and non-GAAP net profit, with 2023 being particularly strong—revenue rose 7.93%, net profit surged 18.41%, and non-GAAP net profit climbed 14.92%. However, in the first three quarters of this year, both profit metrics turned negative, signaling fading growth momentum amid industry adjustments.
Gao Zhengyang, a researcher at Suzhou Merchant Bank, pointed out that even with Gree's technological strengths, weak industry demand makes it difficult to translate these advantages into consumer demand, exposing performance pressures.
**Xiaomi's Growing Threat** Gree's internal challenges are compounded by external competition. A Pacific Securities report acknowledged Gree's long-term growth potential, citing its focus on air conditioning, HVAC, and new energy sectors, along with undervalued stock. However, short-term risks include industry competition, raw material price volatility, and overseas expansion hurdles.
The "industry competition" cited in the report has materialized as a pressing challenge from newer players like Xiaomi. The launch of Xiaomi's smart home appliance factory in Wuhan dealt another blow to Gree's stronghold. Coincidentally or not, Xiaomi announced the operation of its first self-built smart appliance factory in Wuhan's Optics Valley in the same week. Founder Lei Jun emphasized that the digital factory specializes in air conditioning production, with an output of one indoor unit every 6.5 seconds and an initial annual capacity of 7 million units. Xiaomi aims to rank among the top two in the industry by 2030, targeting 10 billion yuan in output value.
The shift from OEM to in-house production enhances Xiaomi's supply chain efficiency and product quality, strengthening its cost-performance advantage and posing a greater threat to Gree's market share.
The rivalry between the two companies spans years, from their 2013 "1 billion yuan bet" to Xiaomi's 2018 entry into the air conditioning market and subsequent clashes—competing over online sales data, warranty policies (Xiaomi extended its 10-year warranty to central air conditioners, while Gree mocked the move), and product quality debates.
Xiaomi's latest half-year report highlights rapid expansion in major appliances. In Q2 2025, its IoT and lifestyle products revenue surged 44.7% to 38.7 billion yuan, a record high. Smart major appliances revenue jumped 66.2%, driven by air conditioner shipments exceeding 5.4 million units (up over 60% year-on-year) and higher average selling prices due to premiumization.
IoT and lifestyle products now account for 33.4% of Xiaomi's total revenue, up from 30.1% a year earlier, with air conditioners being a key growth driver.
Gree Electric did not respond to inquiries.
For Gree, this winter's chill stems from both industry cycles and new competitors. To overcome these challenges, the company must not only align with inventory reductions and demand recovery but also accelerate transformation in channels and ecosystem development to reclaim its growth "spring."
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