Air conditioning: Record heat waves fuel a second wind for manufacturers

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Cold air is in hot demand. Even before the start of summer, Asia has experienced record temperatures which climbed as high as 49C. As rising incomes allow more people to alleviate misery, air conditioner manufacturers can expect increased sales.

Japanese officials on Friday expressed concern about the number of deaths from heat stroke in recent years. In Tokyo, about 90 percent of those who died last summer had not used air conditioning, according to the government. He wants to install cooling shelters and encourage the elderly to use air conditioning.

Singapore, India, Vietnam and Thailand have all faced similar problems as they endured searing temperatures this year. The answer has been simple: buy more air conditioners.

In the longer term, it is not so simple. To cool is to heat. Globally, the use of air conditioners and electric fans accounts for about one tenth of all electricity use. Much of that comes from fossil fuels in Asia, releasing carbon dioxide that warms the atmosphere. However, the risks to people’s lives and economic productivity require urgent solutions, even if they aggravate the underlying problem.

Manufacturers have been under the weather recently. Shares of the biggest Chinese manufacturers, Midea and Gree, have halved from a 2021 high. Midea is trading at 11 times future earnings, less than half the levels of three years ago. The pair, along with its local peer Haier Smart Home, did well for many years, with the median Chinese household income topping $10,000 in 2011. But its growth stalled as larger cities reached saturation. Japan’s Daikin and South Korea’s LG reached that point much earlier.

Households typically need a median income of $10,000 to pay for air conditioning. That excludes many of those hardest hit by rising temperatures. However, a growing middle class in South Asia will boost demand for fresh air. Expect that to increase the fortunes of equipment manufacturers.