Analysis of Gree Electric's "Aluminum-for-Copper" Strategy: Quality and Cost Considerations in Sticking to Copper Tubes

Based on the collected information, I will conduct a systematic analysis from four dimensions: industry background, Gree’s strategy, cost competitiveness, and long-term prospects.

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According to market data, copper prices experienced a sharp rise in 2025:

Indicator	Early 2025	End of 2025	Increase Rate
LME Copper Price (USD/ton)	~9,000	12,960	+42.52%
Shanghai Spot Copper Price (CNY/ton)	73,830	101,053	+36.87%
Copper-Aluminum Price Gap	~3x	~4x	Continually Widening

Copper accounts for approximately 20%-35% of the raw material cost of air conditioners, with each household air conditioner using about 6-7 kg of copper. The rise in copper prices has brought heavy pressure to the entire industry [1][2].

• Policy Support
  : In March 2025, ten ministries and commissions including the Ministry of Industry and Information Technology jointly issued the “High-Quality Development Implementation Plan for the Aluminum Industry (2025–2027)”, clearly listing “aluminum-for-copper” as a key direction for expanding aluminum consumption [3]
• Industry Consensus
  : Mainstream enterprises including Midea, Haier, Hisense, TCL, Aux, and Xiaomi signed the “Self-discipline Convention of the Air Conditioning Aluminum Enhanced Application Research Working Group” to promote the application of “aluminum-for-copper” technology [3]
• Technology Maturity
  : Data from the China Household Electric Appliances Research Institute shows that all-aluminum heat exchanger air conditioners account for 40%-50% in Japan, 30%-40% in South Korea and Southeast Asia, 15%-20% in the US, and the penetration rate of all-aluminum heat exchangers in global new energy vehicle air conditioners exceeds 60% [3]
• Cost Advantage
  : According to estimates, “aluminum-for-copper” can reduce material costs by 20%-25%, and the cost of a single 1.5 HP air conditioner can be reduced by 120-350 CNY [3]

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On January 5, 2026, Gree Electric released the “Statement on Recent Market Concerns”, with core positions including [1][2]:

“Gree household air conditioners will not increase in price”

“To meet the standard of Gree’s 10-year free warranty service for household air conditioners, we currently have no plans related to ‘aluminum-for-copper’”

“In the future, if relevant research can fully meet Gree’s quality and technical standards and be officially applied, we will clearly mark it to fully protect consumers’ right to know and choose”

Dong Mingzhu has made many public statements, reflecting Gree’s strategic resolve [2][3]:

Viewpoint	Core Content
Quality First	“Quality is always the first consideration, not cost”
Technical Prudence	“We have researched aluminum technology for many years, but the reason we still insist on not using ‘aluminum-for-copper’ is that it has not yet reached the same technical conditions and guarantees as copper”
Long-term Commitment	“We will definitely research until aluminum can completely replace copper, and we will adopt it then”
Sense of Responsibility	“To be a good enterprise, one must be responsible to the country, to shareholders, and also to employees”

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According to financial data, Gree Electric faces the following challenges [4][5]:

Financial Indicator	Data	Interpretation
Stock Price Performance (1 Year)	-14.78%	Stock price is under pressure
Latest Quarterly Revenue	USD 4.003 billion (Q3 FY2025)	17.53% below market expectations
Gross Profit Margin	Net profit margin of approximately 17.62%	Still maintains a good profitability level

: How can Gree maintain price competitiveness while competitors reduce costs through “aluminum-for-copper”?

Despite cost pressures, Gree has multiple moats:

Competitive Advantage	Specific Performance
Brand Premium	Gree has established the perception of “high-quality air conditioners” among consumers, who are willing to pay a premium for reliability
Service Commitment	The “10-year free warranty” is the highest standard in the industry, and aluminum tube air conditioners are difficult to match the same level of warranty
Scale Effect	As the industry leader (28.1% of online retail sales, 32.4% of offline retail sales), Gree has stronger supply chain bargaining power and copper futures hedging capabilities [2]
Cost Absorption Capacity	Gree stated that it will reduce costs through “cost control, technological innovation, process optimization, improving production efficiency and reducing waste, etc.” [2]
Channel Control	A strong dealer system and self-owned channels reduce intermediate link costs

Industry analyst Liu Buchu pointed out [1][2]:

“It is unlikely that air conditioner prices will rise significantly this year”

, due to the following reasons:

• Insufficient market demand makes it difficult to pass on price increases
• National subsidy policies continue, and price increases are contrary to policy dividends
• Price wars remain the main competitive method

: Amidst widespread cost pressures in the industry, Gree’s “no price increase” promise may instead become a marketing advantage, attracting price-sensitive consumers.

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Scenario	Copper Price Trend	Impact on Gree	Response Strategy
Scenario 1	Copper prices fall	Cost pressure eases, sticking to copper tubes becomes a quality label	Strengthen the brand positioning of “all-copper genuine materials”
Scenario 2	Copper prices remain high	Cost pressure persists, but can be passed on to consumers or absorbed internally	Use brand premium to maintain gross profit
Scenario 3	Copper prices continue to soar	Some competitors are forced to follow “aluminum-for-copper”, intensifying industry differentiation	Gree may become the leader in the “high-end copper tube air conditioner” niche market

• China Galaxy Securities
  : As copper prices rise, the air conditioning industry will inevitably implement “aluminum-for-copper”, and the technology is mature and has promotion conditions [1]
• Zhou Jiale, Tianfeng Securities
  : Short-term material substitution cannot be achieved overnight; white goods leaders can pass on cost pressures through price increases, new product launches, etc.; historical data shows that in the previous two copper price uptrend cycles, major white goods companies eventually restored their profitability [1]

:

Dimension	Evaluation
Short-term	Cost pressures do exist, but Gree has scale advantages and service differentiation, and is expected to maintain competitiveness through internal absorption
Mid-term	The “aluminum-for-copper” trend may trigger product grading in the industry, and Gree can occupy the “high-end all-copper” market position
Long-term	If aluminum technology is fully mature and has significant cost advantages, Gree may adjust its strategy, but it will be based on consumer informed consent

: At the current stage, Gree’s insistence on copper tube materials , for the following reasons:

1. Gree’s “no price increase” promise forms differentiation amidst the industry’s price increase trend
2. The value created by the “10-year free warranty” service far exceeds the difference in material costs
3. Brand premium and consumer trust support price stability
4. Scale advantages provide cost buffer space

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[1] 21st Century Business Herald - “Gree Electric: No Price Increase for Household Air Conditioners, No ‘Aluminum-for-Copper’ Plan for Now” (https://www.21jingji.com/article/20260105/herald/21de809812a59db838362a67efcf37db.html)

[2] Southern Plus - “Air Conditioning Industry Faces Price Hikes and ‘Copper-Aluminum Dispute’? Gree Responds” (https://www.nfnews.com/content/ky9vZD7k3G.html)

[3] Consumer Reports - “1.5 HP ‘Aluminum Tube Air Conditioner’ Only 999 CNY! The ‘Aluminum-for-Copper’ Dispute in Air Conditioners Rises Again” (https://time-weekly.com/wap-article/326440)

[4] Jinling API - Gree Electric Company Profile Data [0]

[5] Jinling API - Gree Electric Financial Statement Analysis [0]