AC makers bet on smaller cities to drive growth this summer

With summer round the corner, air conditioner makers are gearing up to introduce products with focus on energy efficiency as they expect tier II and III cities to drive growth.

Firms like LG, Voltas, Carrier Midea, Daikin, Blue Star and Panasonic are confident that their sales will grow in double-digits this summer despite unseasonal rains in North India delaying onset of the warm season.

The industry, however, is concerned that price hike after the rollback of excise duty benefits and higher certification norms by Bureau of Energy Efficiency could hurt demand.

“For the current fiscal year 2014-15, the (AC) market size will stand at 3.4 million units, with a growth rate of 7 per cent. The production for FY15-16 is projected at 3.7 million units, accounting to a turnover of Rs 8,000 crore,” Consumer Electronics and Appliances Manufacturers Association (CEAMA) President Manish Sharma told PTI.

In the ongoing fiscal, the total AC market in India is expected to be around Rs 7,400 crore.

According to Refrigeration and Air Conditioning Manufacturers Association (RAMA), the industry is hopeful that this season will be better than last, even though there has been a temporary setback due to rains in March.

“The industry is hopeful and expects the market to grow at a steady rate of 8 to 10 per cent on account of higher disposable income, rise in economic sentiment, positive consumer confidence,” RAMA President Krishna Sachdev said.

He, however, added that “rollback of excise duty extension has impacted the industry costs due to which many players have increased prices marginally”.

Yet, companies are hopeful that after two years of sluggish demand, they will gain sales momentum this season.

South Korean firm LG, which is aiming sales of Rs 2,800 crore with up to 25 per cent growth this season, has lined up inverter AC along with ‘mosquito away’ technology.

“Sales from tier II and III cities is picking up and this year we expect 40 per cent of our sales to come from towns below 10 lakh population,” said LG India Business Head Air Conditioners Saurabh Baishakhia.

He said LG will spend around Rs 50 crore this season on marketing of ACs and will run promotion schemes, including finance options and EMI.

Similarly, Panasonic which has lined up more than 50 models during the season, is expecting sales in smaller cities to grow as much as in metros.

“Owing to the increase in demand for air conditioners and the launch of our new Smart Life conditioners, we expect growth in this segment across metro and tier II and tier III markets,” said Panasonic India Managing Director Manish Sharma.

Expressing similar views, Blue Star Executive Director and President of AC&R Products Business B Thiagarajan said, “Close to 55 per cent volume comes from tier II and III markets.”

The company plans to spend Rs 35 crore this season on branding and marketing and has lined up 81 models.

Japanese firm Daikin is pushing its R32 inverter AC range with its campaign ‘Think inverter Think Daikin’.

“We are well prepared this year with our R32 range of inverter AC and are running a campaign telling people on how to save energy,” said Daikin Airconditioning India Managing Director K J Jawa.

Daikin is expecting a sales growth of 15 per cent and is aiming to sell around 4,00,000 units of residential AC.

Tata group firm Voltas is also expecting to grow 15 per cent this summer with an assortment of energy efficient products in split and window category. It has also introduced inverter ACs season.

“We expect to continue with a double-digit growth this season with an assortment of energy efficient products in split and window category,” said Voltas President and Chief Operating Officer (UPBG & M&CED) Pradeep Bakshi.

Carrier Midea is seeing similar growth across regions and cities. “We expect marginally better growth from top 35 cities in India,” said Carrier Midea India Vice President Sales & Marketing Sanjay Mahajan.

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