Higher costs, late summer keep AC sales cool

With production costs rising due to the new energy norms and a delay in the start of summer in some parts of the country, air-conditioner makers say sales have been slow to pick up. Industry estimates conservatively project growth rates of about 8-10 per cent for the segment this summer. Overall, the AC market is estimated at 3-3.5 million units annually.

Krishan Sachdev, Managing Director, Carrier Midea India, said that on average, summers have been delayed by two-four weeks in several parts of the country.

However, “there has been an improvement in consumer buying sentiment overall and trends in Southern and Western India are positive. We are targeting a 40-50 per cent growth in volumes between both brands – Carrier and Midea.” The company, which started manufacturing its ACs locally last year, has ramped up the presence of its products across retail outlets.

Energy-efficient Companies, such as LG and Carrier Midea India say that since AC makers have had to increase prices by 5-10 per cent compared with last season, value engineering is a key strategy to contain the rise in costs and woo consumers.

The past three years have been challenging for the industry as production costs have gone up year-on-year due to energy norms as well as currency fluctuations.

Saurabh Baisakhia, Business Head, RAC (Room Air Conditioners), LG India, had earlier said that the company expects 20-25 per cent growth for its residential AC business and is projecting a targeted turnover of ₹2,500 crore from the residential AC segment by the end of this year.

“We saw a spike in our air-conditioner sales in the last 10-15 days, indicating the arrival of summer. Our sales figures will go up with the mercury,” he said, during a quick visit to Chennai.

K.S. Krishnamurthy, Chairman, Rathna Fan House – one of the leading air-conditioner retailers in the country - says in the last 10 days, his store has sold more than 3,000 units – in contrast with less than 1000 units in the first 20 days of March.

However, in the North, which is the biggest market for the overall industry with 38 per cent share, the minimum temperature still hovers around 20 degrees Celsius. This does not augur well for the brands including major brands such as Voltas and Whirlpool.

“The product movement in the North is very tepid, primarily lead by weather. So the consumption euphoria is yet to set in,” says Shantanu Das Gupta, Vice-President (Marketing), Whirlpool. However, he was quick to add that one cannot say that the trend will not turn around.

“A three-week hot weather is enough to make a significant difference.”

Companies are also focusing on offering more energy-efficient products with lower costs. SK Sinha, CEO, Sharp India, said, “We have introduced the latest technology and are focusing on offering consumers energy-efficient products which reduces the cost of ownership and energy bills. This will be key to increasing the penetration of ACs in India.” The company has started local manufacture of its ACs this year.

Window ACs still popular Meanwhile, LG, Carrier Midea India, Whirlpool and Sharp believe the window AC market is here to stay and has become even more important after prices have risen due to the new energy norms. Several players had exited the window ACs market in the past.

Carrier Midea’s Sachdev believes that window ACs will continue to be relevant from the affordability point of view for a fair amount of time. Currently, nearly 20-25 per cent of AC sales in the country are of window ACs, which are popular in the North. Companies say window ACs lower the entry barriers for new buyers, and its installation costs are also low.

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