Europe’s heatwave is bright spot for China’s portable AC makers

[HONG KONG] As heat records shattered across Europe in the last weeks of June and indoor temperatures rose to uncomfortable levels, many of the continent’s residents sought immediate relief in the form of portable air conditioner units.

Rising consumer appetite for such units, which can be installed almost instantly and are cheaper than the traditional split inverter units that are more common in the US and Asia, is providing earnings tailwinds for Chinese appliance giants including Midea, Haier Smart Home and Gree Electric Appliances.

“Overall, we expect strong demand for window-mounted air conditioners to drive year-on-year export sales growth for major Chinese manufacturers in the summer months,” said Morningstar analyst Jeff Zhang, forecasting a “meaningful” boost in second- and third-quarter revenue growth.

Foshan-based Midea could see consumer air conditioning sales in Europe grow by more than 20 per cent year on year for the second quarter, according to Citigroup. The firm anticipated this summer’s demand by stockpiling two to three times last year’s inventory of portable split air conditioners ahead of the peak season, analysts led by Xiaopo Wei wrote in a note.

Haier Smart Home could record double-digit growth for its European air-conditioner segment this year, which accounted for an estimated 20 per cent of its regional business in 2025. Gree’s overseas revenue also only contributes about 15 per cent of group sales, according to Citi.

While welcome, stronger European demand is “unlikely to fully offset weaker sales in China, which remains the largest revenue market”, said Bloomberg Intelligence’s Elaine Lai.

Chinese appliance makers continue to face challenges including a stubbornly weak consumer market back in China, lower domestic subsidies and rising commodity costs.

A sharp rise in raw-material costs led by aluminium and copper could also squeeze gross margins and temper the earnings upside, according to Lai.

Underpenetrated

Only a fifth of European households have air conditioning, International Energy Agency data shows. That offers further opportunity for appliance makers, in particular those of portable units, as the continent’s politicians and regulators get bogged down in the debate over if and how to allow the installation of the bulkier wall-mounted units.

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Chinese products’ high convenience for usage, affordable pricing and installation cost savings will structurally benefit key manufacturers in the long run, according to Zhang. “This may become recurring if global warming persists.” BLOOMBERG