China Green Subsidy Program Seen Boosting Sales By 2 Million Units
China’s $4.1 billion subsidy on home appliances -- designed to spur purchases of energy-saving TVs, refrigerators, air conditioners, washing machines and water heaters -- could lead to a price war on TVs, according to NPD DisplaySearch. LCD and plasma TV makers may try to promote sales of energy-saving products in the second half of 2012 through a 5-20 percent reduction in retail prices, said Bing Zhang, director of China market research. Price cuts, as much as 15-20 percent, are expected to be largest in the 32-inch category, Zhang said, followed by 19- and 42-inch TVs. Any TVs that don’t meet the energy saving index will become “excess inventory,” Zhang said. As a result, Chinese TV makers may have to cut prices over the next few months, he said.
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
A spokesman for TV maker TCL told us the company “always provides different ranges of products with competitive prices to mass consumers in China,” but added TCL has “no plan to lower the price at this stage.” TCL said Wednesday that its 259 LCD TV models, including all of its 3D connected TVs, were included in the list of products to be subsidized under the program overseen by the National Development and Reform Commission, which took effect June 1 and will run through May 2013. TCL said its TV fleet is the largest included on the list published on the NDRC website, and the visibility will “accelerate the popularity” of TCL’s “full cloud strategies” and boost sales of its high-end products.
TV subsidies will be equivalent to a 10 percent price cut and should benefit companies including Skyworth, Hisense, TCL, Haier, Changhong, Konka, and major TV retailers including Gome, Suning, and Wuxing, Zhang said. The program is expected to produce additional TV sales of about 2 million units in 2012 and is likely to accelerate replacement of CCFL-backlit LCD TVs by LED-backlit sets, Zhang said. Sales of flat-panel TVs are forecast to grow 10 percent year over year in 2012 as a result of the program, he said.
No CCFL-based LCD TVs will be subsidized under the program because they don’t meet the energy efficiency standard, according to DisplaySearch, but not all LED-lit LCD TVs qualify, either, since only about 60 percent achieve the minimum specified energy saving index of 1.7, and less than 20 percent meet the higher index of 1.9. TVs meeting the greater indices receive higher subsidies by about $8, according to the index. Overall, LED-backlit LCD TVs will benefit by the program, while CCFL-backlit sales could decline much faster as those models don’t qualify for the subsidy, DisplaySearch said. Roughly 50 percent of current plasma TV models meet the 1.4 energy-saving index required to meet subsidies, it said.
Some entry-level and lower end LED-backlit panel modules from Taiwanese and Chinese makers will not meet the energy saving index, while most Korean-made LCD modules are expected to qualify. That will lead to a re-design of backlights to boost brightness and increase energy performance in the near term, DisplaySearch said. In turn, that could stimulate optical film demand, while at the same time increase backlight unit costs, according to the report. Meanwhile, since Chinese panel makers are focusing on production of 32-inch and smaller TV panels, the subsidy program is expected to benefit Chinese panel makers as well, DisplaySearch said.