Not everyone will remember it, but in December 2013, China saw a notable moment in its business world when Xiaomi founder Lei Jun declared on a televised awards show that his company would surpass Gree Electric in revenue within five years. The exchange stood out because Gree’s chairwoman, Dong Mingzhu, raised the stakes by turning his words into a RMB 1 billion (USD 140 million) bet.
Gree ultimately won in 2018 with revenue of RMB 198.12 billion (USD 27.7 billion), supported by its manufacturing base, distribution strengths, and leadership in air conditioners. Yet the symbolic rivalry never fully disappeared.
Gree recently released its third-quarter earnings. For the first three quarters, the company reported revenue of RMB 137.654 billion (USD 19.3 billion), down 6.62% year-on-year (YoY). Net profit reached RMB 21.461 billion (USD 3 billion), down 2.27%. It was the only company among China’s “big three” home appliance makers to post a decline.
Adding to the pressure is Xiaomi’s deeper push into the air conditioning market. Citing third-party data, 36Kr reported that in June, Xiaomi’s online AC sales briefly surpassed Gree’s. The shift has fueled discussion that Xiaomi is moving closer to a position Gree long held firmly in a market it helped define.
Diversification stalls
Gree’s third-quarter results highlight growing pressure on its core business. In the period, the company generated RMB 9.855 billion (USD 1.4 billion) in revenue, down 15.09% YoY. Net profit attributable to shareholders fell 9.92% to RMB 7.049 billion (USD 986.9 million). Both revenue and profit declined more sharply than the company’s year-to-date trend.
The slowdown reflects a longstanding structural issue. As one of China’s best-known appliance brands, Gree remains heavily dependent on air conditioners. In response to recent investor questions, management said consumer appliances, led by air conditioners, accounted for 78.38% of revenue in the first half of 2025, totaling RMB 76.279 billion (USD 10.7 billion).
Rival companies have taken different paths. Midea Group and Haier Smart Home have benefited from broader product portfolios and overseas expansion. For the first three quarters, Midea’s B2B revenue grew 18% YoY, outpacing the 13% growth in its consumer business. Revenue from new energy and industrial technologies, smart building technologies, and robotics and automation reached RMB 30.6 billion (USD 4.3 billion), RMB 28.1 billion (USD 3.9 billion), and RMB 22.6 billion (USD 3.2 billion), with growth rates of 21%, 25%, and 9%.
Haier’s overseas revenue rose 10.5% during the same period, including more than 25% growth in South Asia, over 15% in Southeast Asia, and more than 60% in the Middle East and Africa.
Gree has invested heavily in diversification, but its boldest bets have struggled. New energy vehicles have not gained significant commercial traction. The company is making progress in chips and high-end machine tools, but heavy upfront spending means neither area is contributing sustained revenue.
Its core business is softening as well. Gree’s gross margin for the first three quarters was 28.44%, lower than in 2024 and extending a two-year decline.
Financial data shows that in the second and third quarters, Gree’s overseas air conditioner shipments fell 4% and 15%, respectively. Domestic shipments rose 7% in the second quarter and 3% in the third, possibly reflecting early benefits from channel restructuring.
Growing business pressure
As China’s national subsidy program winds down, home appliance makers are contending with inventory cycles, a weak property market, and subdued consumer sentiment. Gree has been searching for breakthroughs on multiple fronts, and channel reform has become one of its most persistent challenges.
For years, the company’s alignment with core distributors was its strongest channel advantage. Gree historically relied on a distributor stocking system. It shipped products to provincial distributors, who then supplied city and county partners. Rebates encouraged sell-through and helped Gree maintain pricing power while keeping marketing and inventory costs low.
While offline retail still dominates home appliance sales, e-commerce, and live streaming have reshaped consumer habits and expanded online distribution. Gree doubled down on building its digital presence in 2019, driving orders through its WeChat mini program. In 2025, it introduced a new offline retail format called “Dong Mingzhu Healthy Home” and expanded it to nearly 1,000 stores across China. The rollout has created friction with traditional distributors.
According to multiple media reports, in August, Gree shifted its online wholesale structure from the “Shengshi” series companies to the newly formed “Hengxin” series companies. Shengshi entities were funded by legacy distributors, while Hengxin entities are staffed primarily by Gree-linked professional managers.
As the Hengxin companies expand Gree’s new online wholesale network nationwide, the distributor-led system that once supported Gree’s AC dominance is being phased out. It is being replaced by a flatter, hybrid model combining online and offline channels. This approach allows Gree to reclaim more channel-side profits at the listed-company level.
CICC said in a research report that reform is inevitable. Weakening the agent model, strengthening retail, and integrating online and offline channels reflect broader industry trends. While revenue may remain under pressure in the short term, these efforts should strengthen the long-term health of Gree’s distribution network.
At an investor meeting in the first half of this year, Zhu Lei, Gree’s marketing director, said the company has simplified its multi-layered channel architecture into a one-to-two-tier system and improved responsiveness and channel control through digitization.
By the third quarter of 2025, Gree’s inventory remained low at RMB 25.3 billion (USD 3.5 billion). The figure suggests the new channel model is largely in place, although Gree still faces a market that is rapidly segmenting.
Xiaomi enters the fray
Market polarization is becoming more pronounced. Some consumers are opting for higher-end, whole-home smart systems, while others are becoming more price sensitive. Gree is struggling to position itself at either end.
In October, its sub-brand Kinghome debuted on major e-commerce platforms. Its latest air conditioner is priced at RMB 1,899–1,999 (USD 265.9–279.9), targeting lower-end buyers. As Gree adjusts its pricing downward, Xiaomi has pushed further into the AC market.
An interview last December brought the rivalry back into view. Dong claimed that Xiaomi paid RMB 500,000 (USD 70,000) to Gree for patent infringement. Xiaomi spokesperson Wang Hua publicly denied the allegation.
In October this year, Xiaomi’s smart home appliance plant in Wuhan began full production. The factory reportedly produces one high-end air conditioner every 6.5 seconds, conducts full-precision testing on key components, and aims to become an industry leader within five years.
Analysts generally believe Xiaomi is trying to reshape the home appliance sector through online distribution, advanced capabilities, and aggressive pricing. The company used a similar approach to break into the smart television market. Unlike TVs, which are typically purchased in single units per household, air conditioners have higher unit potential, making the segment even more attractive.
Xiaomi’s disclosures show strong momentum. In the second quarter of 2025, its smart home device business posted a gross margin of 22.5%. Xiaomi shipped more than 5.4 million air conditioners, a record high and more than 60% year-on-year growth.
China Galaxy Securities said that in June, Xiaomi briefly overtook Gree in online AC sales before Gree widened the gap again. Gree still leads. According to All View Cloud, Midea led China’s all-channel AC market in July with a 29% revenue share, followed by Gree at 17% and Haier at 15%.
Meanwhile, Dong maintains that Gree’s ACs are “the world’s best,” citing a large patent portfolio supported by mass filings.
R&D spending remains strong. For the first three quarters, Gree raised its R&D investment from RMB 5.4 billion (USD 756 million) last year to RMB 5.62 billion (USD 786.8 million), an increase of 5%.
But in a weaker economic environment, Gree must turn its R&D output into products consumers want to buy. That requires closer engagement with emerging distribution channels and sharper insight into different customer groups.
Despite declining revenue and profit, Gree has maintained a high dividend payout ratio. Its interim proposal calls for RMB 10 (USD 1.4) per ten shares, totaling RMB 5.585 billion (USD 781.9 million). The amount represents about 26% of year-to-date net profit, consistent with 2024. Since listing, Gree has distributed more than RMB 177.6 billion (USD 24.9 billion) in dividends. But stable earnings remain important to maintain investor confidence.
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Xie Yunzi for 36Kr.