Galanz starts washer price war

Chinese home appliance maker Galanz Group told the Global Times Tuesday that most domestic drum washing machines, also known as front-loading washing machines, are sold at unreasonable prices because the producers have been paying high patent fees to foreign partners.

The Shunde-based company launched a new energy-efficient drum washing machine with a six-kilogram capacity on Monday, pricing it at 999 yuan ($160.4), far lower than competitive products.

Domestic home appliance makers could reduce manufacturing costs by developing advanced technologies themselves rather than paying high patent fees to their Japanese counterparts, Lu Jilie, a spokesperson for Galanz, told the Global Times Tuesday.

Suning Appliance Co, China's largest electrical appliance retailer, e-mailed data to the Global Times Tuesday indicating that similar washing machines are sold on its online platform for 3,000 to 4,000 yuan a unit.

Some industry insiders were skeptical of Galanz and nonplussed by the low price.

Drum washing machines cannot be sold at such prices unless the sellers are not afraid to go bankrupt, and the pricing might be marketing hype by Galanz, Jin Youhua, chairman of Sino-Japanese home appliance joint venture Hefei Rongshida Sanyo Electric Co, was quoted by the Beijing News as saying on November 23.

Galanz could turn a profit on this price because the company will get government subsidies of 260 yuan per unit on its new energy-saving washing machine, Lu said.

The subsidy policy began on June 15 and will end on May 31, 2013. Lu declined to comment on how Galanz might price its washing machines after the subsidy policy phases out.

Galanz, the largest microwave oven maker in the world, may intend to fight for a position in the domestic washing machine market through price cutting, given that its washing machines have not been selling well in China since the company entered the sector four or five years ago, Liu Buchen, a home appliance expert at Zhengzhou-based Jiachunqiu Media Institute, told the Global Times Tuesday.

Liu estimated that Galanz will make money on its new washing machines with or without subsidies, because the current profit margin on drum washing machines in China is over 50 percent, probably the highest in the domestic home appliance sector.

With fairly mature technology, domestic producers could make drum washing machines to sell at 999 yuan, a marketing management staff member at Suning.com told the Global Times Tuesday on condition of anonymity.

Since the start of November, many drum washer brands, such as Haier and LG, have lowered their prices in China by over 1,000 yuan a unit.

The launch of the low-priced Galanz drum washer is expected to drive further price competition, which will help drum washing machines to proliferate in China, noted Liu.