2024 promises to be an exciting year for the appliances industry. As inflation fears subside together with the expectation of no more rate hikes and, dare we say it, a cut in rates, the next year is full of growth opportunities.
The industry is also further buoyed by the roll-out of further Matter enabled communication and Home Connectivity Alliance (HCA) compatible appliances, the increased adoption of home energy management systems (EMS), provision of increased levels of consumer service and, lastly, consumers (and companies) preparing for record temperatures over the next five years.
The impact of interest rate stabilisation on the housing market
According to the latest data released by the US Labour Department in November 2023, CPI inflation increased by only 3.2% in the 12 months to October, down from 3.7% in September.
With inflation seemingly under control, industry experts now expect long-term US interest rates to stabilise.
Interest rates forecast to range from 3.3% to 3.5% in 2024, which sets up an ideal environment for a rebound in the US housing market
Source: Euromonitor International
Home prices are also expected to continue recovering in 2024.
A stable or downward-trending US interest rate will benefit the wider global major appliances market by stimulating demand for new homes and durable goods.
Summer heatwaves for the next five years
Heatwaves in 2024 are predicted to break records and continue to do so over the next five years, fuelled by a naturally occurring El Niño weather pattern and greenhouse gases (GHGs), according to UN forecasts. The same forecast predicts that there is a 66% likelihood that annual average surface temperature between 2023 and 2027 will be more than 1.5C above pre-industrial levels.
To cope with predicted heatwaves, many consumers will be pushed to find long-term cooling solutions. In Europe, where air conditioner penetration rates are low, the long-term solution for low-carbon heating and cooling systems has landed on heat pumps. This is evident in the heightened launch activity on heat pumps in IFA 2023. European governments are heavily subsidising heat pump installation as upfront costs are still much higher than fossil fuel-based appliances. The EU has a goal of installing an additional 10 million heat pumps by 2027.
One of the many heat pumps presented at IFA 2023, Midea’s Green Smart Home Solution
Source: Euromonitor International, image taken at IFA 2023
The smart home’s next phase
Our Smart Homes: How to Unlock the Potential briefing discussed how standards such as HCA and Matter can solve challenges faced in integrating hardware and software in traditional smart homes. As a result, consumers will be able to unlock a wide variety of services and experiences, transforming the way we live.
Limitless opportunities in the next phase of the smart home evolution
At IFA 2023, industry heavyweights from South Korea, LG and Samsung, and Vestel were the first to announce commercial implementation of cross-brand connectivity. Leveraging HCA specification 1.0, this new cross-brand compatibility for Samsung and LG will be launched in Samsung’s SmartThings app and LG’s ThinQ app in Q4 2024.
The move towards “servitisation”
In July 2023, LG Electronics announced its goal to grow revenues from USD51 billion to USD79 billion by 2030, through transforming itself into a “smart life solution company”. The plan is to diversify its current business portfolio and creating a business focused on “customer engagement”. In short, LG wants to focus on services to drive revenue growth, launching ThinQ UP 2.0 at IFA 2023 as part of its “Home as a Service” approach. ThinQ UP 2.0 is LG’s platform for its smart home appliances.
The focus on services or “servitisation” is important to appliances companies which derive most of their income through hardware sales
Source: Euromonitor International
Services provide a more predictable income stream, higher margins, and increased customer engagement opportunities.
LG’s ThinQ UP 2.0 will initially support a limited number of appliances
Home energy management systems coming to a home near you
Sustainability, more specifically energy efficiency, has long been a focus of appliance companies. To level up energy efficiency at home, appliance companies publicised home EMS in a big way at IFA 2023. Home EMS present a new high-growth product segment for appliance companies, whose other product categories have high penetration rates.
EMS will play a role in the smart home of the future and owning the data generated will be immensely valuable to appliance companies. Owning the platform will enable companies to provide personalised services, enhanced experiences and, most importantly, increased customer engagement. In the evolution towards “servitisation”, it will be critical to own the home EMS.
Appliance companies also need their own EMS to fend off industrial automation companies such as ABB and Schneider Electric.
Haier’s hOn energy ecosystem
Source: Euromonitor International, image taken at IFA 2023
For further insights into trends impacting the appliances space, read Smart Homes: How to Unlock the Potential and Megatrends: Digital Living – A Framework for the Future.