Russian household appliances are going to China

Chinese factories producing household appliances reduced contract production prices by 5–10%, which encouraged Russian customers to abandon Turkish factories in their favor. The latter were always more expensive, but provided faster logistics and allowed a significantly smaller volume of batches per article compared to Chinese ones. The trend of transferring the production of household appliances from Turkey to China will continue in 2024, but subsequently brands will begin localization in Russia, experts believe.

Due to a decrease in demand for the production of household appliances in China, local factories are reducing the cost of contract assembly by 5–10%, the founder of the manufacturer of household appliances Jacky’s, Gusein Imanov, told Kommersant. “Now it has become 17–20% cheaper to produce large household appliances for Russian companies in China than in Turkey, so we have doubled the workload at Chinese factories,” he said.

Mr. Imanov added that due to a decrease in demand in the Russian Federation, equipment suppliers are trying to find the maximum marginal business scheme, with the opening of a new railway freight route between Russia and China in October and a reduction in logistics costs, the country “becomes the most profitable for production.”

A representative of the household appliances brand Schaub Lorenz confirmed that prices at Chinese contract manufacturing companies have fallen by up to 10% compared to last year, depending on the segment. According to him, Schaub Lorenz is also increasing the placement of orders in China.

After the outbreak of hostilities in Ukraine, many foreign vendors of household appliances froze supplies to the Russian Federation, among them Electrolux, Bosch, LG, etc. They were replaced by Chinese, Russian and Turkish brands (see “Kommersant” dated November 18, 2022).

Most of the equipment is assembled in Turkey and China. In the last two years, contract manufacturers have been actively fighting for the Russian market: for example, Chinese factories provide lower prices and mass production, but in large quantities, and Turkish factories provide better configured and faster logistics to the Russian Federation with a multiple smaller order per item, says the commercial director Holodilnik.ru Alexey Pogudalov.

“Previously, Russian manufacturers of household appliances were ready to overpay for Turkish production, but receive faster delivery and minimum orders. However, with a large reduction in prices, manufacturers are ready to wait for the delivery of electronics from China, which takes three months,” says Mr. Pogudalov.

CEO of the Kuppersberg household appliances brand Dmitry Shashkin says that the company has doubled the location of contract production of household appliances in China. “However, prices are regulated not only by the factories themselves. What is important is the cost of components, metals and glass, whose price has increased over the past year, so we do not see any changes in the cost of one final device,” clarifies Mr. Shashkin.

Alexey Belyakov, general director of the Vard household appliances brand, also confirmed the reduction in purchasing prices at Chinese factories. However, according to him, this is due to an increase in orders from the company: “Long-term and mutually beneficial agreements reached over the past couple of months allow us to predict increased volumes over the next year and, as a result, improved conditions from factories.”

Kommersant’s interlocutor among top managers of household appliance manufacturers believes that in 2024 the trend towards transferring the assembly of electronics of domestic brands to China will continue, but by 2025 many manufacturers will begin to localize production in Russia.

“Sooner or later, factories of foreign manufacturers frozen in the Russian Federation will have to resume work; one of the proposed options is to create contract production of domestic equipment at these factories,” believes a Kommersant source. The authorities continue to put pressure on producers who have frozen capacity in Russia (see Kommersant, October 13), demanding that they resume production, find tenants, or sell factories.

Timofey Kornev