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It has been a bitter-sweet summer for India’s air-conditioning manufacturers and its end customers. The summer is said to be ‘hotter than ever’, and a combination of pent-up demand and rising consumer demand has boosted sales, but major AC manufacturers are just being cautious. .
Blame it on everything from the war in Ukraine to rising commodity prices.
That means even more Indians will want to get air conditioners to ride out the summer heat–annual sales will increase by 10 percent to nearly one crore units as next March, they have had a double disease. The first is that there have been a number of price increases in recent months (with more on the way), including a change in the energy label that the government will implement in the month of July.
“Despite that, people are buying and buying,” said B. Thiagarajan, managing director of popular brand Bluestar. “The demand is still strong.”
“The industry is expected to grow in size and value,” said a spokesperson for Voltas, the market leader. “(But) apart from the price, the more important thing is the supply chain and filling ratios at the counters.”
Post-Covid global supply chain instability and shortages have adversely affected the heating industry in India. This has led to uncertainty and an increase in the cost of materials that go into AC such as copper, aluminum etc. In fact, almost all brands have seen several price increases in the past few months. For example, for a brand like Bluestar, that means a total increase of about 15 percent in the last few months. And another hike will probably be in July if not earlier.
“The current global situation is due to the Russia-Ukraine conflict, the weakness of the sector, the breakdown of the international supply chain, the increase in the price of goods and the impact of inflation fuel will be more affordable for all the consumers,” said Gurmeet Singh, chairman. and managing director, Johnson Controls-Hitachi, adding, “One of the biggest challenges for manufacturers is to increase the price without affecting this great demand of customers.”
About half of India’s air-conditioning sales take place in the summer months, and they’ve been a washout for the past two years – in 2020 the country’s first lockdown will hit the beginning of summer. Years later the deadly second wave was the party poper.
This year, companies expect strong sales, although there are concerns about the impact of the shortage and rising costs on sales. For example, Bluestar’s Thiagarajan pointed out a different trend in purchasing preferences, “What’s happening is (customers) are opting for smaller models. one star.”
The government’s new energy labeling initiative from July 1 will increase the star rating for energy efficiency and increase the cost of more expensive types of energy. “But since 3-star air-conditioning accounts for 65 percent of sales, that’s not a big deal,” said CP Mukundan Menon, president and COO of Bluestar’s refrigeration and air conditioning division.
Meanwhile, AC manufacturers are happy with the increase in sales, even as bells are ringing for another price hike. Warming their hearts is a series of actions by the government to help the industry to face the worst of the Covid-import gas-gas that was banned and launched a production-linked-stimulation (PLI) program for construction projects as part of Atmanirbhar Bharat measures.
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