Raw material prices continue to rise, and the home appliance industry is experiencing a wave of price increases

It can be said that "price increase of home appliances" is the key word for the development of the home appliance industry at the end of 2020 and even in early 2021. News about price increases of home appliances has been coming one after another. I believe that many consumers have already felt the "price increase" when shopping for home appliances in stores. Now is the Spring Festival, and users will choose to buy several large and small home appliances for their homes at this time. The Spring Festival is the peak season for home appliance market sales. However, facing the "price increase" in the home appliance industry, what should everyone do?

It is understood that basically all home appliances such as televisions, air conditioners, refrigerators, washing machines, gas stoves, etc. are increasing in price. Previously, many home appliance manufacturers have announced the price increase information of their own home appliances to the outside world. Home appliance brands such as Midea, Gree, Hisense, TCL, and AUX have already started a new round of price increases.

Due to the continuous and rapid rise in the prices of upstream bulk raw materials and the continuous increase in manufacturing costs, the air-conditioning industry has shown a comprehensive price increase trend. Hisense Air Conditioning Company decided to raise the prices of some products from January 10. The relevant person in charge of Hisense Air Conditioning also stated that the price adjustment products are mainly the affordable series, with a price increase of about 10%; on January 12, TCL Home Appliances Co., Ltd. issued a "Letter from TCL White Appliances to All Dealer Friends" mentioned that due to the increase in raw materials and logistics costs, TCL plans to increase the prices of refrigerators, washing machines, freezers and other products on January 15, with an increase of 5%-15%. TCL said that with the uncertainty of the domestic epidemic and the continued raging of the epidemic abroad, since July 2020, the main raw materials such as refrigerators, freezers, and washing machines have risen by more than 35%. At the same time, logistics costs are also rising, causing the company's various costs to continue to rise.

At the same time, in the home appliance stores, we can also see the "price increase" of a number of home appliances. In the Haier product sales area, a staff member told relevant people that after the price increase, the price of a washing machine will increase by about 300-500 yuan. In the kitchen appliance sales area, a staff member also said that the industry generally increased prices, and the increase in range hoods and gas stoves was about 300 yuan; in the air conditioner sales area, Gree Electric Appliances store staff said that not all air conditioners have increased in price, but several models have already increased their prices. Midea staff said that there has been no price increase yet, but it is estimated that a notice will be issued next.

In fact, the price increase trend in the home appliance industry began to show signs as early as the end of 2020. At the end of 2020, some compressor companies issued price adjustment notices, clarifying that the supply price of air-conditioning compressors would be increased in 2021. Many air-conditioning companies have also released price increase signals, with some product prices increased by 100 to 300 yuan. In addition, according to data from third-party institutions, since the second half of 2020, the prices of many categories of home appliances in China have shown an upward trend. Taking color TVs as an example, the average offline price in November increased by more than 16% year-on-year, and the average online price increased by more than 20% year-on-year.

From the price increase information released by relevant home appliance manufacturers, we can understand that the price of home appliances has increased due to rising raw material prices and rising manufacturing costs. This is indeed the case. The rise in raw material prices is the fuse for this price increase of home appliances. According to relevant data, from April 2020 to December 2020, copper prices rose by 45%; electrical steel rose by 34%; aluminum rose by 52%; the price of rare earths (praseodymium and neodymium) rose by 67% month-on-month; the price of another rare earth material, terbium, rose by 49%.

As we all know, for home appliance manufacturers, especially large appliances, the price increase of the main raw materials such as copper, aluminum, and steel used to manufacture products will inevitably put a certain pressure on the cost of product manufacturing. Generally speaking, the cost of raw materials can account for more than 70%. If the price of raw materials fluctuates greatly, the production and operating costs of enterprises will increase accordingly. In fact, this can also be simply understood as the main manifestation of market operation.

In addition to the rising prices of raw materials, labor and logistics costs also put considerable pressure on the profitability of home appliance companies. The sudden outbreak of the epidemic has impacted the normal operation system of the original industrial chain, causing some supporting companies in the industrial chain to reduce production or go bankrupt. In addition, the spread of the epidemic abroad is not conducive to the import and export of home appliances in terms of logistics and transportation. These have a direct impact on the operating costs of home appliance manufacturers. Faced with rising upstream raw material prices and increased operating costs such as labor and logistics under the epidemic situation, home appliance manufacturers have to raise the terminal prices of their products to maintain business operations.

For related home appliance companies, raising the terminal price of products can alleviate the operating pressure to a certain extent. From the perspective of business operations, facing the overall development status of the home appliance industry under the epidemic, product price increases are an inevitable trend of development at this stage. For the majority of consumers, home appliances are indispensable for daily life. If the price continues to rise, it will inevitably affect consumers' daily purchasing needs.

Faced with the rising prices of home appliances against the trend, relevant people in the industry said that the recent fluctuations in the prices of some home appliances are an important manifestation of market operation. It is expected that if the epidemic situation at home and abroad gradually improves and the market returns to normal, the price fluctuations of bulk raw materials are expected to return to normal, and the prices of home appliances are also expected to stabilize. At the same time, the Home Appliance Industry Association also stated that "there will be no major price increases for home appliances." In addition, relevant companies also stated that in the face of the pressure of rising related costs, we mainly increase the added value of products to better meet the needs of consumers. Therefore, in my opinion, we all need to treat this round of "price increases" in the home appliance industry rationally.