Market regulator will investigate Gree's claim against rival Aux

An ongoing battle between two major air-conditioner manufacturers is heating up as a key retail promotion gala approaches on Tuesday.

Gree Electric Appliances Inc has accused Aux Group, of Ningbo, Zhejiang province, of producing and selling substandard air conditioners.

The State Administration for Market Regulation said on its website on Monday night that it considers the matter to be of great importance, and it has ordered local market regulators to investigate the allegation as soon as possible.

The China Consumers Association appealed to business operators to provide reliable and qualified products and services to consumers.

Gree posted a statement on its Sina Weibo account on Monday afternoon claiming the energy efficiency of eight models made by Aux is significantly lower than what Aux claims on its labels.

Aux responded on its Weibo account that Gree had disparaged Aux's product quality, which it called a clear act of unfair competition given next week's shopping event and the approach of the peak season for air-conditioner sales. The company said it has reported the case to police, and will file a lawsuit.

By Monday night, Gree, based in Zhuhai, Guangdong province, had released eight inspection reports of the Sichuan Institute of Electron Production Supervision and Inspection that it said showed the eight Aux models were substandard.

Online sales of Aux's air conditioners rose 56 percent in the first quarter, while Gree's online sales dropped 11.6 percent year-on-year, according to Beijing-based market consultancy All View Cloud.

The consultancy said the sales of air conditioners in the domestic market are expected to drop 2 percent to 55.9 million units this year compared with the same period last year.

"The overall air-conditioner market saw slowing growth, so the upcoming June 18 shopping gala is of great significance for air-conditioner makers to boost their sales, especially for Aux, which has relied heavily on online sales," said Zhang Yanbin, an independent researcher in the home appliances sector.

Zhang called competition in the air-conditioner sector fierce, adding that Aux's low-price strategy and rapid expansion in e-commerce sales threatens Gree's dominant position in the industry.

Gree led in offline air-conditioner sales last year, accounting for a 37.6 percent market share, followed by Haier and Midea, which took 24.5 percent and 11.5 percent shares, respectively, according to the Qianzhan Industry Research Institute.

But in online retail sales, Aux ranked first in 2018, with a market share of 26.02 percent and unit prices that averaged 2,720 yuan ($393), while Gree held a 22.12 percent share, according to All View Cloud.

Aux and Gree also have been involved in intellectual property and patent infringement disputes. Last year, Aux was ordered to pay 40 million yuan to Gree for violating intellectual property rights.

Gree's revenue in 2018 totaled 200.02 billion yuan, a 33 percent year-on-year increase.