June 20, 2019

Co-published article: Getting warm

Vaillant, a global leader in the development of high-efficiency heating, cooling and hot water products and solutions, is moving its China HQ to Shanghai to focus on its growth market region

Heating, cooling and hot water products maker Vaillant, one of the world’s largest producers of consumer home heating units, has decided to move its China headquarters from Beijing to Shanghai to prepare for what expects to be a surge in sales in the coming years that will make China the company’s single biggest market worldwide.

In China, one in every 4 families that set up gas wall-hung boilers uses Vaillant. While Vaillant’s primary manufacturing facility globally is located in Wuxi, to the west of Shanghai.

“We have seen double digital growth every year for the past ten years, and while the first half of this year has seen a slow-down, we see continuing growth in this market, a return to high levels of sales, especially in the main southern cities,” Vaillant’s Klaus Jesse, who in charge of International Sales for the company, said in an interview.

“We originally located our headquarters in Beijing on the expectation that north China would generate the bulk of sales, but we are seeing more growth in the major cities of southern China. So it makes more sense to have our management team in Shanghai and closer to production and to the main market,” he added.

Vaillant, which is based in Remscheid in Germany, is a private family-owned business, but Jesse said it currently has global annual sales of around €2.33 billion  and  Europe is currently its biggest market.

“But the rate of growth of sales in much higher here compared to Europe, and that plus the size of the market mean that inevitably China will be our single biggest market before too long,” he said.

Vaillant, founded in 1874 and now operating in over 60 countries around the globe, has for years stressed the environmentally-friendly and energy-saving advantages of its products.

“We have been operating in Asia since the 1950s and in fact had a significant business in Hong Kong in that era,” Jesse said. “But then our focus changed and our growth over the past few decades has been primarily in Europe, including Eastern Europe. Our business in China really started to build about 10 years ago, and has been very strong.”

The key to the expansion of Vaillant’s business in the past decade has been twofold – the explosion of middle-class apartment housing and the expansion of the natural gas network to large areas of China.

“The residential market in China is very important for us and there is big potential for further growth in the years ahead,” Jesse said, adding: “We don’t like markets that are susceptible to bubbles, we don’t like sudden ramp ups of demand. We rather like steady growth, and we see overall that the growth of the middle class in China will allow for the steady growth of our business in the coming years. China will become our biggest single market.”

Vaillant, he said, viewed the China mainland market for in its products as being around 1.6 million units per year.

“This is a big market and there is room for many players. But technology and German branding are of great help in terms of our building business here in China.”

He said the company sees some Chinese players in the market offering products which are to one extent or another copies of Vaillant products, but doesn’t worry about it too much, with quality and safety being key considerations of buyers. “They are not operating in the same area as we are,” he said.

The expansion of natural gas lines to virtually all of China’s major cities has also been a boon for Vaillant in the past decade.

“Our heaters are mostly powered by natural gas and so basically we have followed the gas lines,” Jesse said. “At this point, just about every major city in China has natural gas, and it is now moving into second and third-tier cities, which of course are themselves as big as major cities in Europe. So we see major potential for the growth of this business in the years ahead.”

He said the key differential between Vaillant’s home market of Germany and the China market was momentum.

“The main difference is just speed, the speed with which change occurs, the speed with which things happen in this market,” Jesse said. “Germany is much more settled with regards to technology, while China has a great willingness to accept new technologies. We are seeing a growing market not only in terms the fitting of boilers and heaters into new residences but also in the refitting of older residences. When people want to upgrade their living environment it is often heating that they will think of first.”

Jesse said Vaillant’s technology had a significant contribution to make to solve the smog and pollution problem affecting China’s cities.

“The state of the environment is obviously a significant problem, the smog in the cities, and the use of natural gas heaters for home heating is a very important part of the solution,” he said. “I remember driving through East Germany in the days soon after reunification, and the dominant smell was the smell of the brown coal being burned to heat houses. Now, if you drive through eastern Germany, that smell has gone. Everyone has converted to natural gas heaters. In China, for instance in Beijing, the smog is bad and home heating is the primary cause of that. Of course, there is also the vehicle emissions which is another issue to be resolved. But the political decision to shift home heating over to natural gas will have significant and positive impact on the smog in China’s cities.”

A major trend these days in all consumer home products is connectivity and Vaillant is on the trend. “Like other companies we now offer the capability to control our devices remotely. In the past, control of heaters was largely based on timers, but increasingly it is the use by smartphones to turn on heaters maybe half an hour before you get home.”

The Vaillant Group operates under eight different brands in different parts of the world, with its core business being the development, production and sale of energy-saving and environmentally-friendly products for heat generation on the basis of natural gas and other renewable energy sources. In the wall-hung boiler segment, the Vaillant Group is the global market leader.

Vaillant has manufacturing facilities and R&D centers in 13 plants located in seven European countries and China, its facility in Wuxi is the only one out of Europe.

This article was produced by the advertising department of China Economic Review in cooperation with Vaillant. The editorial staff had no role in its preparation.