China’s slowing economic growth is “very concerning”, according to the head of Europe’s largest home appliance manufacturer. He warned that the vast manufacturing sector in China could export cheap products abroad as the domestic market cools.
Hakan Bulgurlu said that in an interview, the “huge” capacity of Chinese manufacturers posed a serious risk to rivals.
He said that if the Chinese market slows down, they will need to put this product on other markets. His company, which owns Beko among other brands, is currently in the process to buy a majority stake of Whirlpool’s European household appliance business.
His warning highlights global ripple effects of China’s declining economy. The recovery that was expected after the Covid-19 locksdowns ended last year has not materialized and consumers are not buying big. According to the statistics agency, sales of home appliances dropped by 5.5 percent in July compared with the same period in 2022.
Bulgurlu added: “I do not see a quick recovery.” He said that a slowdown in factory production and the development of property could reduce commodity prices, which would lower Arcelik’s costs.
Arcelik, which accounted for 40 percent of its €7.7bn sales in the last year, also expressed concerns about the demand for home appliances. He stated that many consumers “were not doing very well”, as high inflation was eroding the purchasing power of their customers.
He also expressed concern about high energy costs this winter that would put additional pressure on consumers. The European Natural Gas prices have fallen by about 90% from their peaks in the summer of last year, when Russia stopped supplying through pipelines. EU storage facilities are also about 93% full. However, analysts warn that a cold winter may still drive prices up.
“I don’t think Russia will be able open the taps, and it looks like the demand is going to exceed what supplies are currently available. This is what I’m worried about. Bulgurlu added, “I don’t think enough politicians are talking about this issue. That makes me worry even more.”
Bulgurlu stated that Arcelik, controlled by Turkey’s Koc Holding, is preparing to enter a “protracted recession” in Europe, largely due to energy inflation.
He claimed that this could be beneficial to Arcelik whose brands are aimed at cost-conscious customers. In Germany for example, “consumers still buy, but they are switching down” to premium brands.
Bulgurlu stated that Turkey has performed better than Europe because the local consumers are more likely to view white goods as an investment at a time of high inflation of almost 60%.
The first-half financial results of the group highlighted the divergent performance between Europe and Turkey. According to Financial Times calculations, revenues in Europe increased by about 6 percent in euro terms compared to the same period of 2022. In Turkey, they rose 39 percent.
In the first half of 2023 the operating profit for the group before financial expenses (which include large costs to hedge against lira fluctuations) rose by 25 percent, reaching TL5.8bn. ($216mn), but fell 6 per cent when expressed in euro.