Air conditioning machine and parts thereof 2001

Air conditioning machine and parts thereof

1. Industry Development
The air-conditioning equipment and parts industry began more than 25 years ago as an import substitution strategy, developing later into an export industry. In 2000, exports were valued at US $1,079.72, an increase of 21% from 1999. Before the crisis of 1997, the market for air-conditioning equipment was growing at a rate of 15 percent per year. Since 1998, manufacturers have tried to use marketing strategies such as advertising, special discounts, after sale services, and compressor warranty to try to boost sales. A growing number of Thailands population can now afford to buy air-conditioners, and it is becoming a common investment. In Thailand, household air-conditioners account for about 65 percent of the 18 billion Baht market. This is an industry that has continued its high growth rate of 15 per cent per year.

2. Production
Most of the air conditioning companies in Thailand are joint ventures between Thai and international investors to serve both local and international markets. As Thailand is a significant producer of compressors, which is a key raw material used in the production of air conditioners, it has attracted a number of international companies to locate their production plants in Thailand. Producers of air conditioners in Thailand can be classified into 3 main groups; 1) American group that can be divided into two sub-categories; Fully foreign-owned Joint venture with Thai company Most of the air conditioners produced by this group are internationally branded. 2) Japanese group that can be divided into two sub-categories; Fully Japanese-owned Joint venture with Thai company Fully Japanese-owned companies will produce other types of products including refrigerators, electric fans and televisions. 3) Thai group, fully owned by Thais, has both international and local brands Production capacity for air conditioners in Thailand was 3.8 million units per year in 2000. Manufacturers total 50 and vary from large to small size, located in urban areas of Bangkok or nearby provinces. Most Thai factories are medium or small size, and produce standardized products under their own brand name; UNI-AIRE, Central Air, Engineering, Nikko, Saffire and Akma. Foreign plants are owned by countries such as Japan, U.S., Taiwan, South Korea and Germany, with most of them being largescale factories.

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Air conditioning machine and parts thereof 2001

3. Domestic Markets
On the domestic front, as the Thai middle class grows and demands more consumer goods, air-conditioners become more common. A growing number of the population can now afford to buy air-conditioners and its becoming a common investment. In Thailand, household air-conditioners account for about 65 percent of the 18 billion Baht market. In 2000, the high competition among air conditioning manufacturers resulted from an increase in consumer purchases. Higher spending power among consumers was brought about by economic recovery in Thailand and a certain number of consumers who retained their purchasing power two years before. Currently, 30 percent of air conditioners installed in households are used for a duration of more than 4-5 years and most of these air conditioners are high energy consuming, old models. In response to high temperatures year after year, it is expected that the purchase and use of air conditioners will increase. The largest domestic market is for small and medium sized air conditioners (12,00021,500 BTU). Although Thailand has experienced an economic slowdown, high temperature levels have resulted in strong demand for air conditioners. The domestic market for air conditioners can be classified into three segments; 1) Upper market (50% of total market size) This market is comprised of good quality products with a high price. Most consumers in this market have a high level of disposable income. Manufacturers who serve this market are primarily Japanese and American. Most products are produced under a brand name from the mother company, including Mitsubishi, Carrier, National, Sanyo and Trane. 2) Medium market (20% of total market size) This market is composed of good quality products with slightly lower prices than those of the upper market. Most of the manufacturers in this market are Thai, produced under their own brand name, including Central Air, UNI-AIRE and Engineering. 3) Import market Most of the imported products are for large scale factories and offices. In 1998, Thailand imported air conditioners valued at 2 billion Baht. This total declined slightly to 1.2 billion Baht in 1999, a decrease of 42.03%. However, imports soared to 1.8 billion in 2000. The main suppliers of imported air conditioners are Japan (45.03%), Malaysia (14.0%), France (8.97%), Taiwan (7.59%), China (6.48%), Germany (4.29%), Singapore (2.54%), the U.S. (2.49%) and South Korea (2.23%).

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Air conditioning machine and parts thereof 2001

4. Export Markets
Air Conditioning Machine and Parts thereof Export Value (Million US $) by Destinations 2001 (Jan.-Aug.)

OTHERS 30.80% BELGIUM 4.59% AUSTRALIA 4.64% HONG KONG 4.66% GREECE 5.16%

JAP AN 16.43% SP AIN 10.19% U. ARAB EMIRATES 6.36% SINGAP ORE 5.97% ITALY U.S.A. 5.79% 5.41%

Source: Department of Business Economics

The export of air conditioners and air conditioning parts experienced a sharp decrease in 1998 following the Asian economic crisis. However, since that year, export totals have increased steadily, reaching a total high of US $1,079.7 million in 2000. With a total value above one billion US dollars, the export of air conditioning machines and parts thereof represents a very important part of the Thai economy, generating revenue, foreign capital and employing a substantial number of Thai workers.

The top single destination for the export of air conditioners and parts is Japan, which accounts for 16.4% of the total export market. In the first half of this year, Japan imported US $151.8 million worth of air conditioners and parts. The second largest market for air conditioners and parts thereof is Spain, representing 10.2% of the total export market. Spain imported US $94.2 million in air conditioners and parts in the first half of this year. Spain is followed by the United Arab Emirates in terms of export market share. The current trend for exports in this area varies among different nations. Some countries import levels have increased in the first half of this year, while others import levels have declined significantly. For instance, Japans imports are up 145% over the previous years level, while Italy and Belgium have decreased import levels by 27.8% and 23.4% respectively. The import levels of air conditioners and parts in hot climate countries is likely to remain steady as these products are considered necessary for the home and work environment. Therefore, air conditioners and parts will remain one of Thailands most important export sectors for the near future.

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Air conditioning machine and parts thereof 2001

Air Conditioning Machine and Parts thereof Export Value (Million US$) Classified by Countries 1997-2001 (Jan.-Aug.)
Export Value (Million US$) Countries 1997 1998 1999 2000 2000 (Jan.-Aug.) 2001 (Jan.-Aug.) 1998 % Change 1999 2000 2001 (Jan.-Aug.)

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

JAPAN SPAIN U. ARAB EMIRATES SINGAPORE ITALY U.S.A. GREECE HONG KONG AUSTRALIA BELGIUM

122.1 45.64 49.22 140.99 27.05 64.14 14.62 129.62 49.63 12.24 655.24 280.28 935.52

78.03 47.49 47.42 71.04 30.45 63.73 17.53 75.81 72.37 14.55 518.41 262.01 780.42

95.8 110.32 42.28 74.73 64.85 56.05 34.47 53.37 62.78 40.72 635.38 260.14 895.52

94.19 96.59 58.71 85.24 80.24 53.91 50.81 59.88 78.63 72 730.19 349.53 1,079.72

61.94 82.88 48.69 61.35 73.99 40.7 45.38 47.01 36.85 55.35 554.14 269.87 824.01

151.75 94.15 58.77 55.12 53.44 49.92 47.64 43.01 42.89 42.41 639.1 284.39 923.49

-36.10% 4.05% -3.65% -49.61% 12.56% -0.64% 19.89% -41.51% 45.82% 18.88% -20.88% -6.52% -16.58%

22.78% 132.32% -10.83% 5.20% 112.99% -12.06% 96.65% -29.59% -13.25% 179.83% 22.56% -0.71% 14.75%

-1.68% -12.44% 38.85% 14.06% 23.73% -3.82% 47.40% 12.19% 25.24% 76.83% 14.92% 34.36% 20.57%

145.01% 13.59% 20.70% -10.16% -27.77% 22.64% 4.97% -8.51% 16.41% -23.37% 15.33% 5.38% 12.07%

Total 10 item Other Grand Total

Source: Department of Business Economics

Air Conditioning Machine and Parts thereof Export Value (Million US$) Classified by Countries 1997-2001 (Jan.-Aug.)

Value (Million US$)

1,200
TOTAL

1,000 800

JAPAN SPAIN U. ARAB EMIRATES

600

SINGAPORE ITALY

400 200

OTHERS

0
1997 1998 1999 2000 2000 (Jan.-Aug.) 2001 (Jan.-Aug.)

Year

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Air conditioning machine and parts thereof 2001

Source: Department of Business Economics

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Air conditioning machine and parts thereof 2001

5. Future Trends
The air-conditioning and refrigeration industry is one of Thailands export-potential industries, as the product range could serve customers in both tropical (Cooling Mode) and cold (Heating & Cooling Mode) areas. The future of this industry looks strong as a growth rate of 15% is expected. In 2001-2002 production is concentrated on power-saving air conditioners as consumers are now more concerned about being more environmentally friendly, thus trying to conserve energy when possible. Domestic market demand is a sign of recovery resulting from aggressive support from the government for revitalizing the real estate sector. It is expected that local demand will reach a growth rate of 24 percent per year. The export market is expanding as a result of relocating production base to Thailand from overseas investors and the potential of penetrating new markets. Consequently, air conditioners remain the most important exports in Thailand.

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