Home Appliance Demand Improved Significantly in July; Market Focus Shifts to Costs and Margins

Overview

The report evaluates industry demand, channels, categories, volume, pricing, and brand share changes based on AVC's July 2026 China home appliance retail data. Industry retail sales still fell 9% YoY in July, but the decline narrowed significantly versus June and 2Q, while two-year cumulative growth rebounded strongly to 15%. The report believes this performance does not indicate that a new industry upcycle has begun, but it significantly reduces concerns about continued demand deterioration and suggests that demand after the high subsidy base is normalizing rather than falling below pre-subsidy levels.

Core views

First, June's weakness was more likely a temporary fluctuation rather than a broad demand breakdown. Second, online and offline sales improved simultaneously, indicating some breadth in demand recovery. Third, air conditioners were the main source of improvement, helped by hot weather in northern China, but refrigerators, washing machines, and kitchen appliances also improved significantly, suggesting brand and platform marketing may have also played a role. Fourth, volume improvement came at the cost of ASP pressure, and consumer price sensitivity and consumption down-trading have not disappeared. Fifth, as YoY base pressure eases from August to September, market attention will shift to costs and margins in 2Q results. Sixth, the investment theses for Midea and Haier are driven more by long-term enterprise businesses and overseas expansion than by reliance on a new upcycle in domestic home appliances.

Analysis framework

The report uses AVC online and offline retail data to cross-validate YoY growth and two-year cumulative growth, and breaks down demand changes by channel, category, volume, and ASP. Overall data are typically weighted 50% offline and 50% online, while the vacuum cleaner category uses weights of 10% offline and 90% online; it also combines brand retail sales market share, seasonal patterns, and comparable company valuations and ratings for assessment.

Methodology notes

• Growth AnalysisYear-over-Year Growth Analysis

  Compare current-period sales, volume, and ASP with the same period last year.

  Used to measure short-term demand changes, but results may be affected by subsidies, promotions, and high or low bases.

• Base AdjustmentTwo-Year Cumulative Growth Analysis

  Compare the current level with the cumulative change versus two years ago.

  Used to reduce the distortion from an abnormal base in a single year; the rebound in July's two-year cumulative growth to 15% supports the view that demand has not fallen below pre-subsidy levels.

• Structural AnalysisChannel and Category Breakdown

  Observe performance separately for online, offline, and air conditioners, refrigerators, washing machines, kitchen appliances, and vacuum cleaners.

  Used to determine whether improvement is driven by a single channel or category and to identify short-term factors such as weather, promotions, and shopping festivals.

• Volume-Price AnalysisVolume and ASP Decomposition

  Decompose changes in sales into changes in volume and average selling price.

  White goods volume trends improved in July, but ASP declines widened, showing that the industry is exchanging price for volume and that consumption down-trading pressure remains.

• Competitive AnalysisRetail Sales Market Share Comparison

  Compare changes in the shares of major brands in the overall market and across categories.

  Determine whether share changes are due to competitive trends or category mix changes by combining historical seasonality.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Midea Group-A（000333.SZ）

  Top pick, maintains Overweight.

  Strengths

  Overall market share rose to 25.7%, and it retained the top position in the air conditioner market; long-term enterprise business and overseas growth form the main investment thesis.

  Weaknesses

  Air conditioner share seasonally declined versus 1H, and domestic industry ASP declines may pressure revenue quality and margins.

  Comparison

  Compared with other home appliance companies, the report gives Midea the highest preference; its growth thesis is less dependent on a domestic home appliance upcycle.

  Risks

  Raw material and other cost pressures, price competition, domestic demand weaker than expected, and 2Q margins below expectations.

• Haier Smart Home-A/H（600690.SS/6690.HK）

  Maintains Overweight.

  Strengths

  Refrigerator share rose to 43.6%, washing machine share rose to 39.6%, and most categories achieved broad share gains; overseas business provides long-term support.

  Weaknesses

  Overall market share fell to 23.5%, although this was mainly caused by category mix changes from the air conditioner peak season.

  Comparison

  Its share advantage in refrigerators and washing machines is stronger than Midea's, but the report's top pick remains Midea.

  Risks

  Cost and margin pressure, domestic price competition, slower overseas growth, and category mix changes.

• Gree Electric Appliances-A（000651.SZ）

  Maintains Neutral.

  Strengths

  Still ranks second in the air conditioner market, with a strong brand and channel base.

  Weaknesses

  Air conditioner market share fell from 28.5% in 1H 2026 to 25.2%, and the business has high concentration in air conditioners and domestic demand.

  Comparison

  Rated below Midea and Haier, with relatively insufficient long-term growth diversification.

  Risks

  Air conditioner price competition, demand volatility, market share loss, and margin pressure.

Key data

• July home appliance retail sales YoY growth-9%A significant improvement from -19% in June and -15% in 2Q.
• July home appliance retail sales two-year cumulative growth+15%Higher than -4% in June and +5% in 2Q, making it the second-strongest month year-to-date.
• Retail sales in the first 7 months of 2026YoY -12%, two-year cumulative +4%More consistent with normalization after the high subsidy base rather than demand falling below pre-subsidy levels.
• July online salesYoY -10%, two-year cumulative +12%Improved from -16% and -6% in June, respectively, but online demand remains more vulnerable to price sensitivity and consumption down-trading.
• July offline salesYoY -7%, two-year cumulative +17%Improved substantially from -22% and -2% in June, respectively.
• Air conditioner salesYoY -15%, two-year cumulative +17%Improved significantly from YoY -28% and two-year cumulative -6% in June; air conditioners accounted for more than 40% of July home appliance sales.
• Air conditioner volume-price performanceVolume YoY -5%, ASP YoY -10%Volume recovered significantly versus June, but the ASP decline widened, reflecting price-for-volume.
• Midea overall market share25.7%Higher than 25.4% in 1H 2026, mainly supported by peak-season air conditioner mix.
• Haier overall market share23.5%Lower than 24.2% in 1H 2026, mainly due to category mix effects from the higher share of air conditioners.
• Haier refrigerator market share43.6%Higher than 40.8% in 1H 2026, mainly driven by offline channel share gains.
• Midea air conditioner market share32.2%Although lower than 33.6% in 1H 2026, it is consistent with historical seasonality and remains the industry leader.

Impact & implications

The July data reduced the tail risk of a further collapse in domestic home appliance demand and may also signal improvement in China's nationwide retail data excluding automobiles. As YoY base pressure eases from August to September, short-term valuation drivers will gradually shift from demand concerns to raw material costs, promotional spending, and margin delivery. If 2Q results can absorb cost and margin risks, investors will gain better visibility on the key recent headwinds. Medium- to long-term allocation should still prioritize leaders with enterprise businesses, overseas growth, and brand share advantages, rather than simply betting on domestic demand entering a new upcycle.

Risks

• The July improvement may have been driven by hot weather in northern China and marketing activities, and its sustainability still needs to be verified.
• Volume recovery accompanied by ASP declines may allow consumption down-trading and price competition to erode industry margins.
• 2Q cost and margin performance may become the new main negative catalyst.
• The high subsidy base will still affect YoY data, and single-month improvement does not equal a new industry upcycle.
• Online channels have higher exposure to price-sensitive demand.
• Vacuum cleaner sales fell 2% YoY, weakening from 13% growth in June, reflecting that demand may have been concentrated around the 6.18 shopping festival.
• Relevant companies such as Midea and Haier have market-making, client service, and potential investment banking relationships with J.P. Morgan; conflict-of-interest disclosures should be noted.

What to watch

• Home appliance retail growth from August to September after YoY base pressure eases.
• Home appliances and consumption excluding automobiles in national retail sales data.
• Gross margin, net margin, and cost changes in Midea's and Haier's 2Q results.
• Whether the recovery in air conditioner volume can continue after the impact of hot weather fades.
• Whether the decline in white goods ASP narrows and whether price competition intensifies further.
• Changes in air conditioner market share for Midea, Haier, Gree, and Xiaomi.
• Whether Haier's share gains in refrigerators and washing machines can be sustained.
• Whether overseas business and enterprise business growth can continue to offset domestic demand volatility.