In March, Azbil Corporation signed a cooperation agreement with CECEP Industry Development Company (CECEP-ID), a subsidiary of China Energy Conservation and Environmental Protection Group (CECEP), to establish a joint venture in May. Azbil Corporation is a leading Japanese provider of building automation systems (BASs). CECEP is the only state-owned enterprise in China that focuses on energy savings and environmental protection. The JV – called CECEP Building Energy Management Company (CECEP-BEM) – will leverage CECEP’s marketing network to open new channels for Azbil’s BEMS in the Chinese market.
CECEP has total assets in excess of RMB 63.2 billion ($10.03 billion), making it the largest energy savings firm in China. Azbil already owns around 70% share of Japan’s BEMS market, and brings to the table significant experience in developing and implementing automation systems, along with key technologies for monitoring and controlling indoor environments.
China will retrofit 99% of its 400 billion ft² of existing building stock for energy efficiency in the coming decades. Plus, it is building an additional 20 billion ft² of building space annually. At present, the BEMS market in China is underdeveloped, fragmented, and has no major players with significant market share. Companies with cost-effective and efficiency-enabling technologies, resources to scale growth, and a strong Chinese network are expected to take the lion’s share of future BEMS market growth.
Based on this recipe for success, we think CECEP-BEM has a very bright future. Poised to enter a rapidly growing market, it will likely become one of the major BEMS suppliers in China over the next three years.
The cooperation between CECEP-ID and Azbil highlights two key takeaways for those watching the BEMS and related markets. First, building partnerships with domestic players in China is a straightforward and effective way to get access to the region’s market. Second, it signals the willingness of Chinese companies to collaborate with foreign developers with strong product offerings rather than wide global channels to market. Since Chinese companies tend to focus exclusively on domestic markets – where new construction fuels the majority of BEMS uptake – the technology value of potential partners trumps wide market access in almost every case. With those takeaways in mind, companies interested in tapping into the Chinese BEMS market’s growing potential should monitor the JV’s progress and seek to establish similar partnerships with strong Chinese technology developers, such as Beijing Tellhow (Client registration required) and Shenzhen Das.