Xiaomi strongly enters the "top three," with online sales surpassing GREE in July. Has the air conditioning landscape changed?

In July 2025, the seemingly unbreakable "dual oligopoly" pattern of China's air conditioning market was torn open by a clear crack.

According to data from Aowei Cloud Network, Xiaomi's online sales market share of air conditioners rose to 16.71% that month, surpassing the long-standing leader GREE (15.22%) for the first time.

Looking at the entire channel, the latest data released by a third-party authoritative research institution shows that the top five brands in China's air conditioning market sales ranking in July 2025 are Midea, GREE, Xiaomi, Haier, and AUX. Among them, Xiaomi has climbed to the third position in the industry with a year-on-year growth rate of 53.9%, becoming the only "high-growth" variable among the top three.

Wang Hua from Xiaomi Group's public relations department forwarded the relevant Weibo post and expressed surprise that the new era has arrived so quickly.

Previously, Xiaomi Group President Lu Weibing stated during a live broadcast that Xiaomi's goal is to become a leading home appliance brand in China by 2030.

The market's clamor and the capital's agitation were instantly ignited.

Does this mean that the stable dynasty ruled by the dual giants Midea and GREE for nearly twenty years has finally welcomed a true disruptor?

Amidst the calls for "change," the Guolian Minsheng Securities team led by Guan Quansen released an in-depth report titled "Re-evaluation of the Air Conditioning Landscape - The Unchanged Parts," attempting to analyze with investors the more critical "unchanged parts" that will determine the ultimate direction of this war.

1. Xiaomi's "Spear": Software Defines Hardware, But Restricted by Physical Costs

Xiaomi's offensive is undoubtedly fierce, with its core strategy being a typical internet dimensionality reduction attack: reshaping "hardware" value with "software" advantages.

Lu Weibing attributed Xiaomi's high growth to the "solid enhancement of capabilities," with the core being the wave of "intelligentization of traditional home appliances." Data shows that the internet usage rate of Xiaomi air conditioner users exceeds 70%, while some traditional brands are only in the single digits, highlighting a significant gap. Relying on the strategy of "full ecosystem of people, vehicles, and homes," Xiaomi has transformed air conditioners from isolated cooling tools into a key node in the smart home network, which fundamentally distinguishes it from traditional players.

This "software" advantage has been converted into a price advantage in the terminal market through the "extreme OEM" model with Changhong Group. The report reveals that Xiaomi has become the largest customer of Changhong's air conditioning domestic sales business, contributing about 60% of its revenue. However, this deep binding has also "squeezed" Changhong's overall gross profit margin to only 7%, with a net profit margin of less than 3%. This clearly outlines the essence of Xiaomi's cost-performance model: maximizing the compression of physical profits in the manufacturing process with the premium of software and ecosystem, in exchange for market share.

However, this software "spear" will ultimately be constrained by the iron law of costs in the physical world. The report, through rigorous financial modeling, delineates a clear "cost iron bottom" for the market: A quality uncompromising 1.5-horsepower air conditioner, even under the ideal conditions where the manufacturer breaks even, the brand has zero gross profit, and it reaches consumers directly through an extreme B2C model, Its inclusive tax retail price is also difficult to be lower than 1900 yuan.

This figure indicates that although Xiaomi's "spear" is sharp, the price space it relies on for expansion has approached its limit, making it impossible to launch a destructive attack.

II. The Giants' "Shield": A Triple Barrier of History, Scale, and Control

In the face of Xiaomi's fierce offensive, traditional giants appear passive, but in fact, they hold a triple "shield" constructed by historical patterns, absolute scale, and industry control.

First, historical experience. The report reviews nearly twenty years of competition in the air conditioning industry and draws a surprising conclusion: price wars have never overturned the landscape. Whether in the weak price cycles of 2009, 2015, or 2019-2020, the final result has always been industry clearing and an increase in the concentration of leading companies. History proves that in this industry, there are almost no cases of achieving a leap solely through price.

Second, unshakeable absolute scale. In this market with an annual scale of about 300 billion, the domestic sales revenue of the two giants, Midea and GREE, is at the trillion level. The second tier, including Haier and Hisense, is around 30 billion, while the third tier, including AUX and TCL, is in the range of 10-15 billion. This means that the scale of the first tier is 3-4 times that of the second tier and 6-10 times that of the third tier. This gap in scale brings significant purchasing bargaining power and cost advantages, which new entrants cannot match in the short term.

Third, absolute control over the industry lifeline. The strongest part of this "shield" lies in vertical integration. In the "heart" of air conditioning—the compressor sector, GMCC under Midea and Lingda under GREE together occupy 65% of the market share, with their component share even exceeding that of the complete machines. Moreover, on the channel side, the industry overall still sees "complete machine brand concentration > channel concentration," with pricing power firmly in the hands of manufacturers.

These three barriers explain why the giants seem to be "holding back." The report estimates that even if the domestic sales increment of Xiaomi and AUX in the past two years (about 15 billion) were added to any giant, the latter's total revenue growth would be less than 3%. Sacrificing the entire profit system for the sake of chasing limited market share is akin to "losing the essence for the sake of the trivial."

III. The Future Battlefield: From "Total War" to "Sub-brand Agent War"

When Xiaomi's "spear" cannot pierce the giants' "shield," how will the future air conditioning war evolve? The report indicates that the industry will not erupt into a disruptive, all-out price war. The focus of competition will shift from direct clashes between major brands to "agent wars" among sub-brands. This represents a smarter, more layered competitive paradigm.

Midea has long been preparing for this. Its sub-brand "Hualing" has quietly increased its online retail market share from less than 1% to nearly 10% over the past five years. Similarly, Haier's sub-brand "Tongshuai" plays a similar role. The report points out that Hualing and Tongshuai account for 25%-30% of the retail sales of Midea and Haier, respectively.

These sub-brands are becoming the "buffer and proactive competitive tools" constructed by the giants. They can precisely position themselves in the cost-performance market, engaging in close combat with new forces like Xiaomi without undermining the high-end positioning of the main brand.

The future air conditioning war may resemble an "agent war" where the main brands command from behind the scenes, while "Hualings," "Tongshuais," and "Mijias" charge at the front.

Epilogue

Returning to the initial question: Has the air conditioning landscape changed?

The answer is yes, but it has not completely transformed.

Xiaomi's entry as a "catfish," with its aggressive push for smart technology, has indeed altered the competitive paradigm of the market and accelerated industry transformation. From this perspective, the landscape is indeed "changing."

However, the foundational structure of the industry, built on historical patterns, absolute scale, and core technology, remains solid. The current scale advantages and integrated barriers of leading air conditioning brands still hold.

Xiaomi's victory resembles a successful "special forces raid," but it has yet to change the overall strategic situation of the battlefield.

A "new era" may indeed have arrived, but its characteristics are not the overthrow of dynasties; rather, the giants must learn to use smarter "agent wars" to respond to the challenges posed by new species. For consumers, a more diverse and fully competitive landscape is slowly unfolding