The Rise of Energy-Efficient Appliances in China and Its Impact on Consumer and Industrial Markets

In the summer of 2025, as temperatures in Shanghai and Beijing soar, a quiet revolution is unfolding in Chinese households. Room air conditioners (RACs)—the backbone of summer cooling in a country with over 600 million units—have become a battleground for innovation, policy, and profit. At the heart of this shift lies China's 2025 trade-in program, a government-led initiative offering subsidies for energy-efficient appliances. This policy, part of the broader "Two New" strategy to stimulate domestic demand and reduce carbon emissions, is reshaping consumer behavior and unlocking a goldmine for manufacturers and technology suppliers.

Policy-Driven Demand: A Win-Win for Consumers and Producers

The trade-in program, funded by 300 billion yuan in ultra-long special treasury bonds, incentivizes households to replace outdated appliances with top-tier energy-efficient models. For RACs, subsidies of 15% for Grade 2 efficiency and 20% for Grade 1 (the highest tier) have created a surge in demand. According to Ember, a leading energy think tank, the program could raise the average efficiency of RACs by 5.0–6.1% in 2025—nearly double the historical annual rate. This translates to a 4.1% reduction in summer electricity use for cooling, saving households up to $943 million in electricity bills.

The ripple effects are evident. From January to May 2025, 77.6 million appliances were traded in nationwide, with Chongqing reporting a 179.6% spike in Grade 1 RAC sales. Major retailers like Suning Group have seen energy-efficient air conditioner sales grow 82% year-on-year. This demand is not just a short-term blip—it's a structural shift driven by policy and environmental awareness.

Key Players: Manufacturers Leading the Charge

The program's success has elevated a handful of home appliance giants to dominant positions in the market. Haier Inc., with a 90% market share in energy-efficient appliances, is a prime example. Its Q1 2025 results show a 10.1% revenue increase to 79.12 billion yuan, driven by premium product lines like the Casarte brand's high-end air conditioners and Wi-Fi-enabled water heaters. Haier's integration of AI Vision technology—allowing appliances to interpret their surroundings and optimize energy use—has further cemented its leadership in smart home innovation.

Midea Group is another beneficiary. The company's cordless kitchen appliances, powered by advanced Ki induction technology, have eliminated traditional power cords, offering both convenience and efficiency. Midea's expansion into smart home ecosystems, including voice-controlled systems and interconnected devices, positions it to capture a growing segment of tech-savvy consumers.

Gree Electric Appliances and Samsung are also capitalizing on the trend, with Samsung's AI-enabled washing machines and refrigerators gaining traction among urban buyers. However, domestic brands like Haier and Midea hold a cost advantage, offering high-quality, affordable alternatives to premium foreign rivals.

Supply Chain Opportunities: The Unsung Heroes

Beyond manufacturers, energy-efficient component suppliers and smart home technology providers are reaping rewards. Dreame Technology, for instance, is seeing strong demand for its robotic vacuum cleaners and smart floor-cleaning machines, which leverage AI and energy-efficient motors. The company's partnerships with e-commerce platforms like JD.com and Pinduoduo have amplified its reach, with sales of smart cleaning devices growing 264% in Q1 2025.

Semiconductor and sensor manufacturers are also in play. The push for smart, connected appliances has increased demand for energy-saving components like variable-speed compressors, IoT-enabled sensors, and low-power microcontrollers. Companies like Holink and Beken Electronics—specialists in smart home networking and power management—stand to benefit as manufacturers integrate more connectivity into their products.

Investment Thesis: A Dual-Track Strategy

For investors, the trade-in program presents two clear avenues:
1. Appliance Manufacturers: Prioritize companies with strong R&D in energy efficiency and smart home integration. Haier and Midea are top picks due to their market dominance, brand loyalty, and alignment with government goals.
2. Supply Chain Innovators: Target firms supplying components for smart appliances, such as Dreame for robotics or Holink for IoT solutions. These companies are less exposed to retail volatility and more insulated by long-term manufacturing contracts.

However, risks remain. Policy execution delays, inflationary pressures from rising input costs, and U.S. tariffs (which hit Chinese exports with up to 145% duties) could dampen growth. That said, the program's scale and the government's commitment to its 5% GDP growth target for 2024 suggest these risks are manageable.

The Bigger Picture: A Model for Global Markets

China's trade-in program is more than a local success story—it's a blueprint for how policy can align economic growth with sustainability. By reducing household energy costs and curbing peak electricity demand, the initiative addresses both immediate consumer pain points and long-term climate goals. For investors, it underscores the importance of aligning with trends that are both policy-driven and market-tested.

As the summer of 2025 unfolds, one thing is clear: the future of home appliances is energy-efficient, smart, and increasingly Chinese. Those who invest in this transformation today may find themselves reaping the rewards for years to come.