Summer heats up GCC air conditioning market
With temperatures regularly soaring to 40º, intense humidity and frequent dust storms, summertime is surely the busiest time of year for air conditioning vendors in the Arabian Gulf. However, the cooling business is hardly a seasonal one. The combination of a booming construction sector, a rapidly growing affluent society and above all harsh climatic conditions throughout the year, makes the Gulf’s air-conditioning and refrigeration equipment industry a most dynamic and lucrative one.
Abdulla Al Zamil, senior vice president at Zamil Air Conditioners (ZAC), one of Saudi Arabia’s leading firms, insists that air conditioning is in fact a year-round business. “For what we call consumer products—room air conditioners and mini-splits—the season is obviously here,” he says, “But for central ac's, the unitary and applied products, it is a year-round business. People build buildings and facilities all year and hence central units of all sizes are on demand year round.”
He would be the one to know, as the Jubail outfit of the Dammam-based ZAC just recently outbid several international manufacturers, and won a five million SR deal to equip an expansion of Saudi Aramco's Berri ethane recovery plant in Jubail's Industrial City. The project is scheduled for completion October 2001.
For the people of the Arabian Gulf countries, air conditioning has long become a necessity, rather than luxury, and cooling units are to be found in every home and business. In the United Arab Emirates (UAE)—a key market for air-conditioning equipment—high per capita income combined with relatively low electricity costs lure US suppliers to aggressively compete against European products.
The Bahraini market for air-conditioning equipment has been traditionally dominated by American, Japanese and French products. However, lately some new players from Saudi Arabia, Malaysia and Thailand are seen trying to enter into this small but lucrative market, according to the Air Conditioning and Refrigeration Institute.
The Kuwaiti market, estimated at $170 million, has experienced a steady 10 percent annual increase over the past few years as more houses, commercial and residential complexes and industrial plants are underway. Central air conditioning systems make up about 60 percent of this market's total imports.
Saudi Arabia’s 22-million strong population makes the largest air-conditioning market in the region, valued at $1.1 billion annually, up from $81 million in 1997. The industry is also one of the most promising sectors in Saudi Arabia itself, and is expanding at an estimated rate of 10 percent a year.
Saudi Arabia annually imports 199,000 air-conditioning units. Major American brands, namely Carrier, Trane, York, and McQuay, dominate the Saudi market, accounting for more than 90 percent of the sales. In 1999, American manufacturers exported $400 million worth of air-conditioning and refrigeration equipment to Saudi Arabia. Japan is the second largest supplier with a three percent market share, followed by France, Thailand and Malaysia.
However, local companies are expected to gradually command a leading share of the market. Industry sources say that availability of spare parts and quick quality service have no less a bearing on who gets the largest market share than brand reputation. The trend is therefore expected to soon shift towards locally manufactured or assembled equipment, enjoying lower operational costs, better spare parts availability and a more reliable after-sale support.
Currently there are 14 local air-conditioning plants in Saudi Arabia. Some manufacture units under licenses from American or Japanese firms, while most do the assembly work on imported components. It is estimated that capital totaling SR 490 million ($130.6 million) in has been invested in these plants, which annually produce 1,147,000 window air-conditioners, 146,000 split air-conditioners and 49,700 central air-conditioners.
The Saudi kingdom also exports SR 233 million worth of air-conditioners annually, mainly to its neighboring Arabian Gulf states, as well as to the rest of the Arab world.
Price is a major factor with air conditioning purchases, making those offering low power consumption naturally more attractive. Although the summertime sales-drive includes all categories of air-conditioners—central, window or split units—Saudis nonetheless prefer to purchase the window air-conditioners as they are easy to install and to use and cheaper, market sources told Al-Sharq Al-Awsat. — (Mena Report)
© 2001 Mena Report (www.menareport.com)