According to CGS's research report, recent AVC retail data shows that major home appliances have generally declined year-on-year since September, while cleaning appliances saw a significant drop in October. However, compared to 2023, sales still show substantial growth. The industry had anticipated this trend, as reflected in data from industry sources, such as the 10/11/12-month air conditioner domestic production plans, which were down by 11.5%, 8.4%, and 9.9% year-on-year, respectively, indicating cautious industry sentiment.

Major home appliances are expected to rely mainly on replacement demand, with short-term impacts from subsidy exhaustion. Meanwhile, the penetration rate of cleaning appliances continues to rise, and the retail market is projected to maintain growth through 2026. Key insights from CGS include:

**Subsidy Phase-out and High Year-on-Year Base Effect** National Bureau of Statistics data shows that September's retail sales grew 3.0% year-on-year, a slowdown of 0.34 percentage points from the previous month, continuing a deceleration trend since June. Within this, home appliances and audio-visual equipment retail sales rose 3.3% year-on-year in September.

Looking back at 2024 subsidies, home appliances and audio-visual equipment retail sales surged by 20.5%, 39.2%, 22.2%, and 39.3% year-on-year in September, October, November, and December, respectively. Major appliances led the growth initially, while cleaning appliances, not included in the initial subsidy categories, saw explosive growth starting in October. Online retail sales for cleaning appliances jumped by 23.7%, 129.6%, 38.3%, and 103.3% year-on-year in September, October, November, and December 2024, respectively, with early weeks showing even higher multiples due to pent-up demand.

**Vibrant Market Competition, Especially in Tech-Consumer Segments** On September 19, Xiaomi extended its air conditioner warranty from six to ten years, covering units installed after January 1, 2025. Despite negative sentiment around Xiaomi's automotive ventures, its air conditioner market share remained stable, with the extended warranty mitigating reputational risks.

The smart lawn mower market is attracting intense competition, with major players like Roborock entering the space. In the action camera segment, DJI has adopted an aggressive pricing strategy, likely in response to Insta360's expansion into drones. Meanwhile, Ugreen benefited from a surge in demand for safer power banks, posting a 60.4% year-on-year revenue increase in Q3 2025.

**Export Market Shifts, Heat Pump Recovery a Bright Spot** On October 10, former U.S. President Trump announced an additional 100% tariff on all Chinese imports, effective November 1. Having already faced tariff hikes since April, leading consumer companies have accelerated global production diversification. For instance, Midea’s Thailand air conditioner factory was recognized as a "Lighthouse Factory" by the World Economic Forum, the first such accolade for a Chinese home appliance manufacturer overseas.

Industry data indicates that heat pump exports to Europe and the U.S. have rebounded since late 2024, with January-August 2025 exports up 22.5% year-on-year. With Europe tightening sanctions on Russian gas and La Niña increasing the likelihood of a cold winter, demand for heating solutions is expected to rise, supported by potential subsidy renewals in some European countries.

**Investment Recommendations** The current market favors tech-driven consumer companies over traditional home appliance leaders. Recommended stocks include Roborock (688169.SH), Ecovacs (603486.SH), and Ugreen (301606.SZ) in the tech-consumer space; TCL ELECTRONICS (01070) and Hisense Visual (600060.SH) in the TV segment; and undervalued, high-dividend plays like Midea Group (000333.SZ) and Haier Smart Home (600690.SH). Cross-industry picks include Sanhua Intelligent Controls (002050.SZ), DunAn Environment (002011.SZ), and DeYe (605117.SH).

**Risk Factors** Potential risks include weaker-than-expected policy effects, U.S. tariff pressures, and intensifying market competition.