The auto parts division of Chinese home appliance giant Midea Group (000333.SZ) began producing actuation systems, thermal management systems, and assisted and autonomous driving systems for cars, the company said on Tuesday.

Midea is among a spate of Chinese non-automotive companies pushing into the scorchingly hot New Energy Sources (NEV) market. Growth in the home appliance industry has been sluggish, pushing companies to explore other options, analysts said. In the first quarter, China’s shipments of air conditioning, Midea’s core product, declined 5.8% from 2019.

Now is the traditional prime season for air conditioners, but sales are not picking up, suggesting the market is saturated, said Home Alliance industry analyst Liu Buchen. Many listed home appliance manufacturers who are under pressure in the capital markets are trying to get rid of their “home appliances” label, he said.

For these new players, NEVs offer an accelerated path, industry experts said. Data from the Chinese Association of Automobile Manufacturers shows that China produced 750,000 NEVs from January to April, more than three times the same period last year.

Midea hopes to transfer its home appliance manufacturing experience to the auto industry, Fu Yongjun, head of Midea’s Welling Auto Parts division, told a press conference on Tuesday. Midea already produces oil pumps and motors for its devices, which correlates with some core auto parts, said Xu Hailiang, vice president of TÜV SÜD Greater China, an independent testing and certification body.

Changes in the automotive supply chain also offer opportunities for new players. Compared to the relatively closed supply chains of the past, NEV manufacturing is more modular, creating a relatively lower entry threshold, industry participants said. With stable cash flow and a mature manufacturing base, it’s a natural choice for home appliance manufacturers like Midea to join the race, Xu said.

However, none of the four home appliance manufacturers entering the auto industry attempt to produce entire vehicles. Home appliance manufacturers generally have no advantage in auto manufacturing, making them unlikely to get into vehicle manufacturing at this point, analysts said.

Hisense Home Appliances Group Co. Ltd. (000921.SZ) tests the water in the manufacture of auto parts. In March, Hisense gave $ 200.7 million for a controlling stake in Sanden Holdings Corp. from, a Japanese manufacturer of vehicle air conditioning systems.

Dong Mingzhu, CEO of home appliance maker Gree Electric (000651.SH), personally invested $ 30 million to become the second largest shareholder in Zhuhai-based electric vehicle maker Yinlong in 2016.

The founder Huang Hongsheng of the television manufacturer Skyworth Group Co. Ltd. (00751.SZ) founded auto company Skywell in 2010 and then acquired and merged bus manufacturer Nanjing Golden Dragon and shifted its business from traditional fuel-powered buses to NEVs. Both are personal investments by the founders that are not associated with their listed companies.

Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com)

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