Chinese home appliance manufacturers have quickened their moves into the booming new energy vehicle sector, as the appliance market is almost saturated, and they need to diversity product portfolio and find new areas for growth, industry experts said.

New technology and software are crucial for NEVs, and home appliance makers possess expertise in electronic devices and software.

Still, they said, NEVs represent a new field that will require an enormous investment for appliance makers, who lack sophisticated technologies and operational experience in the automobile industrial chain. It also takes a long time for new entrants to build product awareness and credibility among consumers.

Home appliance giant Midea Group has recently begun the construction of a new plant that will make components for NEVs. The plant is in Anqing, Anhui province, and is being built with a total investment of 11 billion yuan ($1.73 billion).

The company, based in Foshan, Guangdong province, said the factory will focus on producing power steering motors, NEV electric compressors and drive motors for the vehicles. When completed, it will be able to manufacture 60 million auto parts per year and generate annual revenue of 40 billion yuan.

The new strategic center established by Midea－after investing in Anhui Welling Auto Parts Co Ltd－demonstrates the company's determination to use its technological assets to make a major mark in the auto parts sector.

Midea said it plans to invest $1 billion over the next decade to overcome technical difficulties, aiming to engage with all areas of NEV production.

It will also build a research and development center and national laboratory for thermal management, main and auxiliary drives and intelligent driving systems at the plant.

Fu Yongjun, vice-president at Midea, said the NEV components center is one of the largest investments in the company's history, and he hopes it will provide strong support for the automobile industry in Anhui.

"Investment in NEVs is a very important strategic direction for Midea for the future," said Fang Hongbo, chairman and president of Midea, adding that the company will implement a development strategy to help forge a new growth engine.

Midea stepped into the fast-growing sector in 2018, establishing NEV parts companies in Guangdong and Anhui provinces. Five types of products covering three production lines－motor drives, thermal management and auxiliary or autopilot systems－have completed testing and gone into mass production.

Industry insiders said the electrification and intelligent systems are the two most important parts for the future development of the automobile industry, as China aims to peak carbon dioxide emissions by 2030 and achieve carbon neutrality by 2060.

"The NEV industry is gaining growth momentum across the globe as more than 20 countries and regions have released schedules to ban the sale of gasoline-fueled automobiles. Meanwhile, consumers have shown growing enthusiasm and demand for NEVs," said Zhao Meimei, assistant president of All View Cloud or AVC, a Beijing-based consultancy specializing in home appliances.

Zhao said growth in the domestic home appliance business is slowing, while the NEV market presents huge development potential and has attracted many home appliance makers.

The revenue of China's home appliance sector in 2021 reached 760.3 billion yuan, up 3.6 percent year-on-year, but saw a drop of 7.4 percent compared with 2019, according to AVC.

There are relatively fewer technological obstacles to producing electric vehicles compared with gasoline-powered cars, Zhao said, noting that Chinese home appliance makers have been engaged in research and development in intelligent manufacturing for many years and have accumulated technological strengths applicable to auto components.

But they also are facing intense competition from traditional carmakers, internet tech giants and NEV startups, such as Tesla, Nio and Xpeng, Zhao said. "As latecomers, the big problem for Chinese home appliance companies is how to establish brand awareness and further expand technological advantages."

China's NEV market has seen explosive growth, and sales of NEVs are expected to surpass 6 million units in 2022, accounting for about 22 percent of all vehicle sales, according to the China Passenger Car Association.

A total of 2.99 million new energy passenger cars were sold last year, surging by 169 percent year-on-year, according to the CPCA. NEVs include electric vehicles, plug-in hybrids and hydrogen fuel-cell energy vehicles.

China has ranked first globally in NEV sales for seven consecutive years, according to the Ministry of Industry and Information Technology.

Anticipating huge growth potential and promising prospects in the lucrative industry, other home appliance giants including Hisense and Gree Electric Appliances, which are facing tough competition in the appliance market, have jumped on the NEV bandwagon.

Hisense Home Appliances Group announced in May it had purchased Japanese auto air-conditioner supplier Sanden Holdings Co Ltd for about 1.3 billion yuan.

The home appliances giant, based in Qingdao, Shandong province, said it will use Sanden as the core company to expand into the automotive air-conditioning industry in a bid to achieve its expansion in different industries and enhance the profitability of Sanden.

In August, Gree paid 1.83 billion yuan for a 30.47-percent stake in Zhuhai Yinlong New Energy Co Ltd, which makes electric buses, electric vehicle charging devices and other energy storage systems, after a failed takeover attempt in 2016.

Together with the 17.46-percent stake already held by Gree Chairwoman Dong Mingzhu, Gree controls 47.93 percent of Yinlong's voting rights. The deal would help extend Gree's product portfolio into energy storage and the new energy sector.

Gree's revenue dropped 15 percent and its net profit plummeted 10 percent year-on-year in 2020 as a result of the negative effects of the COVID-19 pandemic.

According to the latest development plan for the NEV industry from 2021 to 2035, approved by the State Council, the country's Cabinet, the proportion of NEVs in the sales of all new vehicles is expected to rise to 20 percent by 2025, and vehicles used in public transportation will be completely electrified by 2035, according to the plan.

Global market research firm International Data Corp has predicted that China's NEV market would grow at a compound annual growth rate of 36.1 percent between 2020 and 2025.

The country's home appliance industry is shrinking in the face of challenges posed by the pandemic and the decline of consumer purchasing power, so traditional manufacturers of home appliances need to seek new business growth points, said Zhang Xiang, a researcher at the Automobile Industry Innovation Research Center, which is part of the North China University of Technology in Beijing.

There are some similarities between vehicle manufacturing and home appliance manufacturing, which gives those companies a measure of competitive advantages in tapping into the automotive sector, he said.

Home appliance companies have expertise in producing air conditioners, touch screens and speakers, and have developed voice recognition technology, which could be used in NEV vehicle-mounted systems, Zhang said.

Instead of choosing to develop cars on its own, Chinese television maker Skyworth Group transferred the ownership of 11 trademarks applicable to vehicles to Skywell New Energy Automobile Group, an NEV manufacturer, for 28 million yuan last year. After the transfer, Tianmei Auto, a subsidiary of Skywell, was officially renamed Skyworth Auto.

Huang Hongsheng, founder of Skyworth and chairman of Skywell, said they plan to launch at least four types of pure electric vehicles between 2020 and 2025, forecasting that a total of 250,000 Skyworth vehicles will be sold in 2025.

Skywell has been producing electric buses for more than 10 years, with seven production centers across the nation. The company has spent 10 billion yuan in auto research and development in the past decade, and will invest another 30 billion yuan in the coming years, Huang said.

The company established a joint venture with Skyworth in 2019 to develop electric vehicle software that can provide artificial intelligence-powered voice interaction capabilities and access internet-of-things devices.

Still, investments by home appliance companies in this new area come with potential risks as competition in the NEV industry heats up, said Zhang of the innovation research center, given that technologies applied to automobile manufacturing can be more complicated than those used in home appliances. In addition, the retail and marketing model of NEVs is totally different.

Luo Lei, deputy secretary-general of the China Automobile Dealers Association, said automobile manufacturing is a very complicated and systematic field, including auto parts manufacturing, assembly and tests, warehousing, logistics and after-sales services.

Traditional carmakers have gained an upper hand in capital and supply chain systems, and their competitiveness shouldn't be underestimated as they master the core technologies of NEVs, Luo said.