Companies

As commodity prices soar, AC makers set to hike price again

Meenakshi Verma Ambwani New Delhi | Updated on March 09, 2021

Projections of an intense summer augurs well for the industry   -  JOTHI RAMALINGAM B

Industry seen getting back to pre-Covid levels on the back of strong pent-up demand

The crucial summer season for the air-conditioner industry comes amidst soaring commodity prices. After a washout summer in 2020 due to Covid-induced lockdown, players are bullish that the industry will get back to pre-Covid levels on the back of a strong pent-up demand. However, with rising commodity prices, industry players said another round of price hike of about 4-5 per cent may be in the offing.

Inflationary commodity pricing trends had forced most AC players to hike price by₹1,500 per unit in January. Players said prices have been rising across commodities such as copper, steel and plastic. At the same time, cost of compressors, a crucial component for ACs, for which the industry is still largely reliant on imports, has also seen a steep increase.

No signs of reversal

Shashi Arora, CEO, Lloyd, said, “We have been seeing an uptrend in commodity prices and in the past three months there have been no signs of reversal. If the costs continue to go up unabated, the industry may not be able to absorb it and may go for a fresh revision of prices by April.”

But, the AC industry remains bullish on the coming summer season. “ Early sales trends indicate an uptrend in line with rising temperatures, which is a positive sign. Given the low penetration of ACs, the category is expected to add new consumers and see strong growth trends which could be even better than the 2019-levels. We expect to see a high double-digit growth in ACs in the summer season,” Arora said.

Eric Braganza, President, Haier India, said: “Commodity prices have gone through the roof and freight costs have also been rising. We are contemplating whether to take a price hike this month or in April and it will to the tune of 4-5 per cent. But I do not think it will have a huge negative impact on demand given the projections of an intense summer.”

Braganza said in the January-March quarter alone, the company nearly doubled its AC sales compared to the same period last year.

Rising production

In anticipation of a strong pent-up demand, Vijay Babu, Vice-President, Home Appliances at LG Electronics, said the company’s AC factories are working at hiked peak capacity and pre-production had started as early as October. “We are expecting to not only get back to pre-Covid levels but also to see a growth of about 40 per cent in slaes compared to 2019. We have already taken two rounds of price hikes in January and February of nearly ₹2,000 (per unit) on our AC products in lieu of the rising commodity prices,” he added.

Most players have already geared up with a new line-up of air-conditioners with various features that focus on energy-efficiency and air-purifying benefits. The size of the AC market is pegged at 7-7.5 million units annually.

Manish Sharma, President and CEO, Panasonic India and South Asia, said, “We are expecting a robust demand for cooling appliances in the backdrop of early and hot summer along with a pent-up demand as last year was a washout for ACs. For the last 3-4 months, we are witnessing a 25 per cent growth in air conditioners and are expecting the trend to continue this season too.”

Published on March 09, 2021

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