After 40 years of development, China's air-conditioning industry has experienced the initial stage of development, rapid development period, stable development period and transformation and upgrading period. In the course of decades of development, in addition to the rapid expansion of the air conditioning market, the competition pattern of the industry has changed in every development, from TOP20 to TOP10.

In the process of this change, the air conditioning brands of the third echelon, such as Shuanglu, Fujitsu and Sanyo, basically disappeared in the full market during the period of stable development of air conditioners, while now the brands of the second echelon, such as Zhigao, Changhong and Kelon, are in a loss predicament. In particular, 00449-HK, which once called out hundreds of billions of targets, may be the first air-conditioning enterprise to fall down in the second echelon.

The change of hundreds of billions of goals from performance to performance

Li Xinghao, chairman of the board of directors of Zhigao, said on December 20, 2010, "by integrating global resources, the company will sell 10 million air conditioners in two years and become a strong enterprise worth 100 billion yuan in ten years."

There are undoubtedly the following three points to enable Chairman Li Xinghao to make such heroic words:

First, the 4 trillion plan in 2008 to stimulate real estate ushered in a golden era, the air-conditioning industry also ushered in a thriving growth format. In 2010, for example, domestic sales and exports of air conditioners grew by more than 35%, with total sales of 100 million units.

Second, the ambition is higher than landing on the Hong Kong Stock Exchange in July 2009, raising hundreds of millions of yuan in cash on hand, the cash flow is abundant, the inner confidence will naturally surge. In addition, even if the future listing fund-raising runs out, other equity financing can be carried out using the HKEx listing platform.

Third, the performance growth rate leads the whole industry and reaches an all-time high. In 2010, the revenue of Zhigao Holdings realized the "Great Leap forward", which increased 41% to 8.468 billion yuan compared with the same period last year, ranking the TOP5 of the air conditioning industry brand.

Everything seems to be moving in a good direction. Unexpectedly, in only one year after throwing out hundreds of billions of plans, the performance of Zhigao changed in 2011, with a net profit loss of 138 million yuan belonging to shareholders, which was the only loss-making air-conditioning enterprise at that time.

The change of performance in 2011 has not only become the starting point of the decline of Zhigao's performance, but also let the outside world see the true side of its own poor management ability and hematopoietic ability. In 2010, when profits were better, government subsidies were as high as 809.2 million yuan, but fell to 178.4 million yuan in 2011. Under the situation of insufficient management ability and hematopoietic ability, once the subsidy is weaned, the loss can not be avoided.

After the loss, Zhigao hopes to recover the decline of the loss through a combination of punches. First of all, Zhigao strives to create opportunities for the popularization of high-end cloud air conditioners, such as establishing multiple cloud space experience halls with SUNING chain stores. Secondly, in order to reduce costs and increase efficiency, Zhigao launched Fortune APP, whether consumers or dealers, as long as download and register members, they can sell Zhigao air conditioners, getting rid of the restrictions of inventory, storefront, capital and personnel. At the same time, in order to reduce the production of compressors to ease the cost of pressure, Zhigao bold to carry out independent compressor research and development. Finally, take air conditioning as the center, spare no effort to develop high-end decoration, household appliances industry chain (refrigerators, washing machines, etc.), high-tech emerging industries and other new areas to seek diversified development.

From the chart above, although the net profit of shareholders is volatile and still unstable before 2012 to 2014, at least there is no sign of increasing losses, reflecting that the strategy of reducing costs and increasing efficiency is somewhat effective.

Two waves of "price war", Zhigao fell into the quagmire of loss

As the saying goes, "rubbing against your illness will kill you".

In 2015, due to the little improvement in the diversified layout of Zhigao and the surge of inventory pressure in the superimposed air-conditioning industry, the major air-conditioning companies fought a "price war" and the average shipping prices were brushing new lows at the end of each month, causing Zhigao to fall into the dilemma of losing money again.

The average shipping price in the air-conditioning industry was 2900 yuan in 2014, but fell to 2430 yuan in 2015, down 16.21 percent from a year earlier, the biggest drop in five years. For the whole year of 2015, the revenue of Zhigao was 7.774 billion, down 15.8% from the same period last year, and the net profit belonging to shareholders lost 690 million yuan.

In this price war, the concentration of the air conditioning industry is gradually moving closer to CR3 (Gree, Midea and Haier), which has obvious advantages in channel, cost and brand. CR3 shipments accounted for 79.91% of total shipments in 2015, the largest share in five years. The market share of the second echelon, such as Zhigao, TCL and Chunlan, is gradually drifting away from the first echelon. Among them, Zhigao's market share was only 4.5% in 2015.

It is worth noting that this price war is not extinguished, but in preparation for the next wave of a larger price war. From 2018 to 2019, under the influence of real estate regulation and uncertainty of Sino-US trade friction, the ceiling of the air-conditioning market gradually appeared, the market entered the consolidation stage, the business performance of major air-conditioning enterprises encountered a downward crisis, and the price war began again. Take the Singles' Day in 2019 as an example, Gree threw out the "double 11" 10 billion profit-making activities.

Under this price war, the first echelon still shows high resilience, while the second echelon of Zhigao is full of grief and delight. In terms of the export price of the air-conditioning industry, the average shipping price of the air-conditioning industry fell from 2980 yuan in 2018 to 2470 yuan in 2019. In terms of the performance of air-conditioning enterprises in 2019, the first echelon only achieved positive growth in revenue from the two oligarchs Gree and Midea, while revenue from Zhigao in the second echelon fell 54 per cent year-on-year, and the net profit loss attributed to shareholders increased to 1.408 billion yuan. Changhong's air-conditioning and refrigerator business revenue was 14.08 billion yuan, down 6.7% from the same period last year.

In terms of market share in 2019, according to data from the China Business Industry Research Institute, among the total sales of household air conditioners of various brands in 2019, the first echelon: Gree accounted for 30.87%, Midea accounted for 28.22%, Haier accounted for 7.41%; the second echelon: TCL accounted for 6.52%, Hisense 4.78%, Changhong accounted for 2.59% and Changhong accounted for 1.54%.

Thus it can be seen that Gree and Midea occupy 60% of the market share in this price war, showing a duopoly pattern. In the past, the market position of the second echelon leader was gradually replaced by TCL and Hisense, and gradually marginalized.

As market share has been eroded, Zhigao has lost its fighting spirit and quietly optimizes its debt structure by selling assets to ease short-term cash pressures.

The year of achieving the target of 100 billion yuan in 2020: the loss remains the same and the prospect is bleak.

In 2020, it doesn't matter what the completion rate is in the current year, which is the target of hundreds of billions of dollars. The important thing is that under the situation of more fierce competition in the air-conditioning industry this year, how to stop the decline of losses is the key.

On October 13, Chigo released its belated 2020 interim results report (the 2020 interim report was postponed because the 2019 performance review process had not yet been completed). The unaudited revenue in the first half of the year was 634 million yuan, down 67.91% from the same period last year. The net profit loss belonging to shareholders was 722 million yuan, which was further higher than the loss of 706 million yuan last year. As for the increase in losses in the first half of the year, Zhigao management did not explain the reasons in the announcement. However, from the operating conditions of the air-conditioning industry in the first half of this year, we can find out the reasons for the accelerated deterioration of the operating performance of Zhigao.

In the first half of 2020, affected by the sudden outbreak of the COVID-19 epidemic, the new demand for air conditioners decreased by 39.2% compared with the same period last year, and the average price of air conditioners decreased by 14.7% compared with the same period last year. In the case of shrinking market demand, the competition in the air conditioning market is becoming more and more fierce, and the advantage of the head brand is becoming more and more prominent. According to the data released by Oviyun, in the first half of 2020, the online brand CR3 of air conditioners in China reached 76.7%, and the online brand CR3 reached 89.8%, and the offline brand CR5 reached 82.4% and 90.3%.

In both online and offline retail markets, the brand concentration of air conditioners has increased compared with 2019. At the moment of the transition from increment to stock in the air-conditioning industry, when the industry concentration is constantly moving closer to CR3, it is basically unrealistic to be marginalized by the market, successive losses, tight cash flow and the loss of core competitiveness.

From the perspective of long-term development, in today's air-conditioning stock market, Gree, Midea and Haier continue to integrate their own internal resources, constantly eroding the market share of the second and third echelons through multi-brand strategies and huge distribution networks. the entry of Internet ecological brands represented by Xiaomi and SUNING has constantly impacted the competition pattern of the industry and accelerated the reshuffle of the industry. In this situation, how to deal with the dilemma of Zhigao? It is unknown whether it is to gradually withdraw from the air conditioning market or to integrate its own internal resources to develop other business sectors.

The wheel of history rolls forward, and will Zhigao, who has been left behind, be eliminated by history? Welcome to leave a message for discussion.