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BSH Bosch & Siemens Hausgeräte GmbH is the most successful Western manufacturer of major appliances in China, which is now the company’s second biggest market after Germany. To support volume sales growth of 60% since 2007, BSH has also been expanding its production base here, at a pace comparable to that of local manufacturers. In five years BSH’s home laundry appliance output in China posted the third largest absolute increase. Only Haier and Midea – whose sales were boosted by government subsidies in rural areas – managed to do better.
A lot is currently being said of the impact of the withdrawal of the stimulus package on consumer demand, and of the necessity of further government subsidies to sustain growth. None of that is of particular concern to BSH. Chinese government intervention has so far been designed to boost rural demand, and almost exclusively boosted sales of low-end appliances, an absolute no-go segment for the premium manufacturer from Germany.
China is the biggest market for the company’s high-end brand, Siemens, which is the only BSH brand available in the country. And looking at the macroeconomic fundamentals, it is unlikely this will change in the near future. The number of high income households is set to increase despite concerns over the performance of the wider economy. Indeed China has seen the largest increase in rich households between 2000 and 2011 owing to its rapid economic growth over the last decade. The highest-earning 30% of households (income decile 8, 9 and 10) accounted for 67% of total households in 2011, up from 58% of total households in 2000.
The company’s investment in China started well before the global downturn and left BSH in an ideal position to ramp up efforts in the world’s biggest consumer market as demand in Europe shrank. Sales in China, and indeed the rest of Asia Pacific, have also successfully offset losses in Latin America, from where the company withdrew in 2009, selling its Brazilian operation to the Mexican Controlladora Mabe to focus on Asia Pacific. That painful decision at the time is now paying dividends.
We expect BSH success in China to continue, protected from the ups and downs of stimulus packages by the growing numbers of households able to afford premium end appliances.