(Yicai Global) Nov. 25 -- Gree Electric Appliances, the world's largest maker of residential air-conditioners, has started construction of a refrigerator and washing machine production base in Changsha, Hunan province as demand for its main product slows.
The firm urgently needs to diversify as the air-conditioning market has hit a glass ceiling, Chief Executive Huang Hui told shareholders last week. Aircon unit sales account for 80 percent of its total revenue, which is expected to remain at CNY200 billion (USD28.4 billion) or gain a little this year, he added.
So, Gree Electric will embrace the 1+N model, meaning aircon plus other household devices. The Zhuhai-based firm will focus on developing fridges, washing machines and small household appliances in the coming years, with the hope that investment in research and development can be monetized, Huang added.
The Changsha plant will have annual output of 4.5 million units, according to a statement released on the firm's Weibo account today. Together with a household and commercial air-conditioner factory that Gree has already commissioned in the city, the firm's investment in Changsha is expected to reach CNY10 billion (USD1.4 billion).
Chairwoman Dong Mingzhu is under pressure to prove the firm's soundness after a new controlling shareholder was brought in this year and a shift towards mixed ownership has introduced private capital and new shareholders, an industry insider told Yicai Global.
Gree Group said in April that it planned to sell its 15 percent controlling stake in Gree Electric to introduce new investor blood. A unit of Beijing-based private equity firm Hillhouse Capital Group won the bidding, but the two parties have yet to sign a formal contract.
Gree Electric has already built washing machine and refrigerator plants in Chengdu, western Sichuan province and Luoyang, central Henan province. It chose to build plants in these locations because they have convenient transportation links, low labor costs and preferential government policies, the insider said.