Investment in Mexico by Chinese home appliance companies has heated up | Great power creation

In January, Mexican refrigerator exports to the United States rose 300 percent. "A lot of people think that Mexico is full of deserts and cacti, but it's actually an industrial country." Hu Hai, chairman of the North American Huafushan Industrial Park, who has worked in Mexico for six and a half years, said in a telephone interview with the first financial reporter across the ocean on July 6 that Chinese home appliance companies are ushering in a new boom in local investment.

Hisense Home Appliances (000921. SZ) is building a smart home appliance industrial park in Huafushan Industrial Park in North America, which is expected to be put into operation this year, with three factories: refrigerator, air conditioner and kitchen appliance. In addition, midea group (000333. SZ), Gree Electric Appliances (000651. SZ), Changhong Meiling (000521. SZ), Omar Electric (002668. SZ) also has the idea of building a production base in North America.

Chinese home appliance companies have gradually increased their refrigerator production capacity in Mexico, covering the United States and the entire American market. Last year, nearly 40% of U.S. refrigerator imports came from Mexico, and the number of Chinese refrigerator and freezer compressors exported to Mexico soared by 80% year-on-year. This year coincides with the 50th anniversary of the establishment of diplomatic relations between China and Mexico, and Mexico is increasingly becoming a bridgehead for China's refrigeration industry chain to open up the American market.

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In recent years, Chinese home appliance companies have increased their investment in Mexico, especially in large white goods industries such as refrigerators. Previously, Haier acquired the U.S. General Electric Appliance (GEA) business in 2016 and took a stake in Mabe, a Mexican home appliance maker, through GEA, Hu said.

In March 2021, Hisense Home Appliances announced in Monterrey that it will invest US$260 million in the construction of a home appliance industrial park, which is expected to create about 7,000 jobs within five years. The industrial park is mainly for the Mexican, American and Canadian markets, producing refrigerators, washing machines, ovens and air conditioners to be close to the American market, shorten the production cycle, reduce logistics links and transportation time.

According to the materials provided by the China Chamber of Commerce for Import and Export of Machinery and Electronics to the first financial reporter, midea group and Changhong meiling two refrigerator giants have also been prepared to deploy investment plans in Mexico. "Midea and Gree are all intensively inspecting Mexico and want to choose a site to build a factory," Hu Hai also revealed to the first financial reporter.

The first financial reporter learned from the TCL annual performance briefing in May 2022 that Omar Electric Appliances, a large refrigerator exporter controlled by TCL Industry, also plans to establish a new production base in North America this year to achieve local production and local supply.

Fifty percent of Mexican refrigerators are exported to the United States

China has the world's largest home appliance industry chain, with 80% of the refrigerator compressor production capacity in China. The United States is the world's second largest home appliance market after China, and it is also a big producer, and its products are mainly supplied to China. Mexico is the main source of home appliance imports to the United States. With tariffs and logistics costs rising, the refrigerator industry chain between China, Mexico and the United States is reshaping.

Industry online to the first financial reporter to provide data show that China and Mexico is the main source of imports of refrigerators and freezers in the United States, Mexico is the largest producer and exporter of refrigerators and freezers in the Americas, in 2021 to benefit from the rise in demand from the United States, Mexico produces nearly 12 million refrigerators and freezers products, of which nearly 80% of the products are used for export, and nearly 70% of these export products are exported to the United States.

"Mexico has a population of 130 million, and the local market is not big. 80% to 85% of the home appliances produced in Mexico are exported to the US market. Hu Hai said that from the perspective of the global home appliance industry, Mexico's home appliance output value ranks third, of which the refrigerator output value ranks second; Home appliance production ranks fifth. Mexico is a springboard to enter the U.S. market and the Latin American market, and the local supporting supply chain is maturing.

Not only Chinese companies, but also European and American white goods companies are also increasing their investment in Mexico. In November 2021, Whirlpool announced that it will invest USD 120 million to expand its plant in Coahuila, Mexico. The investment is mainly used to increase the production capacity of the refrigerator production line and upgrade the production line, and will invest 110 million US dollars to build a new French door refrigerator production line, with an annual output of more than 300,000 units.

In 2022, Bosch AG of Germany announced that it will build its first local plant in Monterrey, Nuevo León, Mexico, with a planned investment of 260 million US dollars to produce refrigeration equipment designed to meet the needs of consumers in the North American market for high-capacity refrigerators. The plant is expected to be operational in 2024 and will have an annual production capacity of 600,000 refrigerators.

The transfer of refrigerator capacity to the United States has led to a downward trend in the number of refrigerators and freezers exported by China to the United States and the Americas after experiencing a peak in 2020 (when the overseas epidemic was severe, and Chinese factories first resumed work and production from the epidemic).

According to the data of the industry online to the first financial reporter, the number of Chinese refrigerators and freezers exported to the United States was 9.56 million units in 2018, 7.68 million units in 2019, 15.81 million units in 2020, and 14.44 million units in 2021; The number of Chinese refrigerators and freezers exported to the Americas was 14 million units in 2018, 12.55 million units in 2019, 22.34 million units in 2020, and 22.16 million units in 2021.

According to the information of the China Chamber of Commerce for Import and Export of Machinery and Electronics to the first financial reporter, Mexico, as a member of the Free Trade Area of the United States, Mexico and Canada, exports 90% of its home appliances to the United States. In 2021, the United States imported refrigeration products such as refrigerators and freezers from Mexico for $5.1 billion, accounting for about 38.9% of the total share; Imports from China amounted to US$3.1 billion, accounting for about 23.7%. Affected by the high international maritime prices, the logistics cost of large-volume home appliances such as refrigerators exported from China to the United States is too high, and the comprehensive cost advantages of Mexico's supply chain and labor have gradually emerged. Since the epidemic, leading home appliance companies at home and abroad have increased their investment in Mexico.

Chinese compressor exports to Mexico soared

In recent years, China's home appliance companies have faced two major problems of trade protection and soaring logistics costs, and passive industrial transfer has frequently emerged. Especially since the epidemic, due to the impact of logistics costs, the trend of order return and transfer in the refrigerator industry has gradually become obvious. There are two directions for the shift, one is Turkey around the European market, and the other is Mexico around the US market.

Since China is the world's largest producer of refrigerators and freezers, the transfer of refrigerator production capacity has also brought about the export of compressors.

According to the data provided to the first financial reporter by the Home Appliance Branch of the China Chamber of Commerce for Import and Export of Machinery and Electronics, in 2021, with the gradual resumption of foreign production, China's exports of refrigerator compressors to Mexico increased by 85.9%. From January to March 2022, China's exports of refrigerator compressors to Mexico still increased by 28.9% year-on-year, nearly 30%. In January 2022, Mexican refrigerator exports to the United States increased by 300%.

Industry Online data also shows that the number of China's full-seal piston compressor exports to the United States in 2020 increased year-on-year, and the reasons for export growth were two points: on the one hand, the fierce Sino-US trade friction in 2019 led to a decrease in exports last year, and the base was small; On the other hand, China's epidemic prevention and control measures are active and effective, compressor enterprises production recovery earlier, after the outbreak of the overseas epidemic, overseas compressor enterprises to return to normal production levels need a certain amount of time, increase the number of compressors imported from China.

On September 20, 2019, refrigerator compressors were excluded from the list of tariffs imposed by the United States for a limited period of time until September 20, 2020. This means that an additional 25% tariff will need to be reinstated from 20 September 2020, stimulating the demand for compressors to be exported early to reserve stocks. Beginning in September 2020, the number of compressors exported by China to the United States began to decline.

In 2021, the country with the largest number of Chinese refrigerator and freezer compressors exported to the American market was Mexico, with the number of compressors reaching 6.367 million, an increase of 80.3% year-on-year, accounting for 47.1% of the share in the American market. Mexico is expected to grow its GDP by more than 5% due to incentives and a rebound in the global economy and trade, and the hotel and catering industry is gradually resuming operations, with good demand for refrigerators and freezers. In addition, mexican refrigerators and freezers are exported to North America in addition to foreign countries. North America has been affected by repeated epidemics, changes in residents' living habits, and a hot real estate market, and the demand for refrigerators and freezers has increased significantly.

Zhou Nan, secretary general of the Home Appliance Branch of the China Chamber of Commerce for Import and Export of Machinery and Electronics, told the first financial reporter that Mexico is becoming an important home appliance production base in the world after China. China's home appliance industry is changing from simple product export to exporting production capacity and brands to the world, and the layout of overseas supply chains should be long-term.