Intense price competition in the global split systems air conditioning market has led to decreased profit margins for some of the industry's biggest global players.
The situation has been exacerbated by an abundance of domestic manufacturers in China selling products at much lower prices, according to a new report by Transparency Market Research.
“Crunched profit margins have a direct negative impact on investments made for research and other activities, which can have a diminishing effect on the overall growth of the market in the long run,” the report said.
“In addition to the presence of a large number of companies in the global split air conditioner systems market, the situation has worsened due to the abundance of domestic manufacturers in China who sell their products at lower costs compared to global brands.
“Moreover, rising concerns regarding the vast amount of electricity consumed to power air conditioning systems of all kinds could emerge as a key challenge and slow down growth globally in the next few years.”
Responding to the report findings, the Air Conditioning and Refrigeration Equipment Manufacturers Association of Australia (AREMA) agrees the split systems market is highly dynamic and competitive.
However, AREMA policy advisor, Greg Picker, believes increased competition is good news for consumers as it keeps prices down.
“Concerns raised in the report about reduced funding for research is contradicted by the huge gains the industry has made in relation to energy efficiency,” Picker said.
“It takes a lot of research and product development to support the massive improvements industry has made over the past decade. For example, air conditioners today are 40 per cent more energy efficient than they were 10 years ago.
“These outcomes cannot be achieved without research and development.”
The report predicts the global split air conditioning systems market will reach $168.14 billion in 2024 growing at a CAGR of 5.1 per cent.