According to the Financial Associated Press on December 29 (reporters Wang Biwei and Lu Tingting), in 2024, under the backdrop of the Consumer Electronics market not rebounding as expected and the household appliance domestic retail market under pressure, the implementation of the old-for-new "National Subsidy" series of policies effectively stimulated consumer vitality.

According to data from the Ministry of Commerce, as of December 19, the old-for-new policy in household appliances has driven the sales volume of more than 52.1 million units across eight major product categories. In addition, the policy accelerates the green upgrade of the household appliance industry, and the expansion of subsidies to 3C digital products within the year has also sparked a "purchase wave" in many areas.

Market analysis believes that related subsidies are expected to continue. CITIC SEC predicts that next year, the amount of funding for old-for-new trading will increase to about 300 billion yuan, with Smart Phones and more home improvement product categories possibly included.

Under this expectation, will the multiplier effect of "old-for-new" continue in 2025? Will market demand show signs of exhaustion?

"Old-for-new" boosts the household appliance consumption market.

"Old-for-new" is undoubtedly the hottest keyword in the household appliance consumption market in 2024.

In the first half of this year, under the influence of consumers' confidence remaining weak at low levels, insufficient driving force in the Real Estate market, and high retention in the household appliance market, the domestic retail market for household appliances faced growth pressure. The implementation of policies such as "National Subsidy" in the second half of the year stimulated further release of consumer demand.

The old-for-new appliance policy has been in effect since August for several months. According to data pushed by AVC, from January to August 2024, the overall home appliance Large Cap (excluding 3C) has seen a year-on-year decline of 3.4%, followed by a year-on-year growth of 25.3% from September to November, significantly boosting the market.

According to a reporter from the Financial Associated Press, since the launch of the old-for-new national subsidy, Suning.com Co.,LTD. has partnered with Financial Institutions, leading brands, and government units to establish over 50,000 community service stations for old-for-new exchanges, conducting more than 6,000 joint government-enterprise group purchases, achieving an overall growth of over 150% in appliance upgrades. Among provinces and cities like Jiangsu, Shanxi, Henan, SiChuan, Peking, and Shanghai, the old-for-new policy has noticeably driven regional sales growth, refreshing the peak sales growth in recent years.

"Subsidies related to the old-for-new policy have a more significant pull on products with strong installation attributes such as Air Conditioners and Cooker Hoods," said Liu Jiyuan, Deputy Director of the Research and Innovation Department at AVC, to a reporter from the Financial Associated Press.

In 2024, Midea Group Co., Ltd (000333.SZ) surpassed a transaction volume of 4 million units under the old-for-new program. Data provided by Suning.com shows that since the implementation of the old-for-new policy, sales of COLMO smart wall-mounted Air Conditioners increased by 101%, Huati energy-saving Cooker Hood sales rose by 150%, Hangzhou Robam Appliances steam oven sales grew by 234%, and sales of Ecovacs Robotics robotic vacuums rose by 113%.

"The national subsidy has also brought about changes in demand patterns. A relevant person from Suning.com indicated that, driven strongly by government subsidies, consumer behavior in the old-for-new appliance market has shown new trends such as 'one-stop shopping, purchasing large and chasing new, green and healthy, and smart trendy products.' Key factors driving consumer purchases include 'low-energy consumption, high energy efficiency, attractive quality-price ratio, smart trends, embedded designs, and zero cold water.'

However, there are market voices suggesting that 'the national subsidy' merely changed the consumer rhythm.

"It is inevitable that policies will lead to future overextension, as seen from the historical experience of the last round of rural appliance promotion," Liu Jiyuan believes that under the current market environment, manufacturers can break through by improving product value through technological innovation, learning to operate users, and adhering to a long-term approach.

Notably, since the beginning of this year, home appliance companies, including Hangzhou Robam Appliances (002508.SZ), Changhong Meiling (000521.SZ), and HAIER SMARTHOME (600690.SH), have been exploring AI large models. According to Liu Jiyuan, AI in home appliances is just beginning, and the focus must shift from product intelligence to multidimensional empowerment in marketing, experience, and operation.

The mobile market is expected to see a slight increase driven by AI.

This year, the Consumer Electronics market including mobile phones and computers has not welcomed the anticipated recovery. Data from the China Academy of Information and Communications Technology shows that from January to October 2024, the shipment volume of Smart Phones was 0.234 billion units, a year-on-year increase of 6.4%, still far from the 0.275 billion units of 2021.

Regarding the reasons for this situation, CINNO Research Chief Analyst Zhou Hua told Caixin that, "On one hand, the pace of global economic recovery has not met expectations, and the slowdown in economic growth directly affects consumer purchasing power and confidence, thus impacting the recovery of the Consumer Electronics market; on the other hand, the lack of revolutionary technological innovation in products has led to insufficient motivation for users to upgrade their devices."

It is worth mentioning that due to the Consumer Electronics market not recovering as expected, this year, national subsidies for 3C products have expanded in many places, triggering a wave of purchasing frenzy at the end of the year.

Caixin reporters previously visited the market and learned that after the announcement of mobile phone national subsidy policies in certain areas, popular stores and products had long lines. Suning.com Co.,LTD. stated that during the first natural week of the "3C digital product subsidy special activity" officially launched in Jiangsu Province, there was an unprecedented queue to buy devices, and the sales of mobile digital products surged 17-fold year-on-year.

According to Suning.com Co.,LTD. data, since the implementation of the old-for-new policy, sales of Lenovo laptops have increased by 356%, while Apple Smart Phone sales have grown by 193%.

Looking ahead to 2025, the subsidy policy will continue to promote the mobile phone market. CITIC SEC latest forecasts that next year, the amount of subsidies for the old-for-new scheme will increase to around 300 billion yuan, with the category expected to expand to include Smart Phones and more home furnishing categories.

In this context, Zhou Hua told Caixin that with the increase in the intensity of the old-for-new subsidies, consumers will be able to enjoy more benefits, thereby stimulating their willingness to purchase new Smart Phones, especially for those users who originally planned to upgrade their devices in the next year or two but have not yet taken action, this could advance their purchasing decisions, thus likely boosting overall sales growth in the mobile market.

According to CINNO Research, the sales volume of the smart phone market in China may reach 0.312 billion units by 2025, a year-on-year increase of 4%. "The implementation of the old-for-new policy will further accelerate this growth trend, keeping sales stable or even exceeding expectations," said Zhou Hua.

In addition, the landing of AI technology on mobile devices has been regarded as an important factor in promoting the recovery of mobile phone sales in 2024. According to CINNO Research, the sales proportion of smart phones equipped with AI features in the Chinese market may reach 33% in 2024, a year-on-year increase of 25 percentage points.

However, AI has obviously not triggered the "upgrade wave" as expected. Zhou Hua told the reporters from Caixin that this is mainly because AI functions are currently concentrated in high-end models, and there are still challenges such as technology not being mature enough and increased costs, requiring mobile phone manufacturers to make more efforts in technology research and development, market application, and cost reduction. Meanwhile, consumer acceptance of AI technology also requires a gradual process of improvement. Therefore, although AI technology may become a watershed for the sales of mobile phone brands, this process is not a one-time effort, and it requires time and joint promotion by the market.

Overall, with the promotion of factors such as AI and national subsidies, institutions still expect the mobile phone market to recover in 2025. However, the extent of recovery and whether the brand landscape will change remains to be seen.