Chinese air conditioner giant Gree Electric plans to enter the fast-growing electric car market in China through the purchase of car-maker Yin Long New Energy, Gree announced on Monday. It’s the latest effort by China’s largest air-conditioner manufacturer to diversify its business, as diminishing air-conditioner sales weigh on revenue and profitability. Financial terms of the deal would be announced within 30 days.
Yin Long was China’s seventh-largest seller of electric buses in 2015, after racking up 7,000 orders and producing more than 3,100 electric vehicles, data from its official website show. With three production bases across the country, it has the capacity to make 33,000 electric buses and 100,000 electricity-powered SUVs yearly.
Gree generates about 95 percent of its revenue from selling air conditioners; however the company is under mounting pressure to seek for new growth points. Over-reliance on a single product is increasing the company’s financial risks, especially as the air-conditioner industry is having bad years in China.
China surpassed the United States in electric car sales last year. The Chinese government said nearly a quarter of a million purely battery-driven electric cars were sold on the mainland last year, more than double to US sales of around 110,000 reported by America’s Electric Drive Transportation Association.
The Yinlong purchase by Gree would mark the entry of another heavy-hitter into the expanding electric car business in China since many high-profile investors are heading towards manufacturing electric vehicles. Gree is one of the world’s leading home appliance manufacturers but has been suffering from slowing demand. Its revenue dropped 23 per cent year on year in the third quarter of last year.
Chinese government support in the forms of subsidies and infrastructure was the main driving force in the growth of the mainland’s electric car market. Developing energy saving and new energy vehicles and charging facilities was also included in the latest five-year plan of China.
Sales of new-energy vehicles tripled to more than 331,000 units in China, including more than 247,000 pure electric cars and 83,600 plug-in hybrids, according to the China Association of Automobile Manufacturers. The Chinese government expects that cumulative sales of new-energy vehicles will reach 5 million units by 2020.