Home appliance market sluggish as subsidy expired

Because of the program, Dazhong Electronics' sales revenue surged 40 percent year-on-year, much higher than the company expected. Xu said that the program not only boosted sales, but also played a vital role in helping the home appliance sector shift from producing low-end to high-end goods.

"The market share of energy-efficient air conditioners and washing machines has increased markedly. Meanwhile, the upstream parts industry has transformed into a more energy-efficient one. The financial subsidy reduced the cost of producing energy-efficient products for companies and reduced the price for consumers to buy them," said Xu.

During the one-year program, sales of energy-efficient home appliances increased from the 1.6 million units in June 2012 to an average 7 million units each month in 2013. The market for energy-efficient home appliances is expanding sharply. Among the total, the market share of energy-efficient flat-panel TVs among all flat-panel sets has reached as high as 93 percent, while the share for green air conditioners, refrigerators and washing machines are 53 percent, 57 percent and 46 percent, respectively, according to the Ministry of Finance.

Xu said that the price for air conditioners with first-grade energy efficiency is generally 30-40 percent higher than second- and third-grade products. People are willing to buy first-grade models simply because the price after a subsidy is competitive to less energy-efficient products, said Xu.

"If the price is similar, people are more willing to buy more energy-efficient products," he said.

The one-year campaign did shore up domestic consumption in line with government plans to reshape the country's economy while guiding consumers toward more environment-friendly products. It also encouraged home appliance makers to be innovative and develop more green products, Xu said.

The future

With the subsidy program now over, companies could face a more sluggish market. Shen Danyang, spokesman for Ministry of Commerce, said that the Central Government isn't planning to roll out another similar subsidy any time soon. Local governments, on the other hand, are more inclined to shore up consumer spending through subsidies and some are mulling over such plans. In May, local authorities in southwest China's Chongqing said the metropolitan city will continue the subsidy until the end of the year.

Consumers hope the subsidies continue so they can spend less on essential items. For retailers, subsidies are an opportunity to boost sales. Home appliance makers, on the contrary, are opposed to subsidies.

"During special times, it's necessary for the government to subsidize the industry to boost consumption. But now, it's not necessary and not the right thing to do," said Zhang Bo, General Manager of the Beijing Branch of Gree Electronic Appliances Inc., one of the leading industrial players.