Unfazed By Slow Start, AC Industry Expects Double-Digit Growth, Over 11.5 Million Unit Sales This Season

Sale of air conditioners has seen a relatively slow start, contrary to expectations, but manufacturers remain confident of registering double-digit growth to cross the 11.5 million unit sales-mark this year.

Leading players in the AC industry said "favourable weather forecast of a scorching summer" and increase in disposable income are likely to push up sales.

Top manufacturers such as Daikin, Panasonic, LG Electronics, Blue Star, Godrej Appliances and Lloyd, expect up to 25 per cent growth this year, along with a substantial contribution from tier-III towns and smaller centres, which are emerging as promising markets for the category.

Sale of energy-efficient 5-star inverter-technology-based models will have a higher contribution from metro cities and other big markets, while affordable 3-star ACs will continue to dominate the semi-urban and rural markets, they said.

Brands have already introduced a new lineup with smart features such as IoT, energy-efficient models with low operational cost, hygiene features with new aesthetic designs, and started a 360-degree campaign, along with attractive finance offers, cashback, and subsidised installation to woo customers as summer sets in.

Blue Star Managing Director B Thiagarajan said "the market is expected to grow 20 per cent this summer season".

"There could be some slowdown (in sales) due to general elections and we have to closely watch it. The RBI (Reserve Bank of India) is tightening the norms for unsecured loans, which may also impact consumer finance schemes. There are reports that consumption has not yet picked up. Yet, I believe that the overall market is expected to cross 10 million units in FY24, and it should be at least 11.5 million units in FY25," Thiagarajan told PTI.

Daikin India Chairman & MD K J Jawa said the residential AC market looks promising and encouraging in the south, east and west regions.

However in north India, the region which contributes over half of the industry volumes, only "primary sales have picked up, and secondary response is still not in line with expectations", Jawa said, adding that "overall industry growth will be 10-12 per cent in value terms".

According to Panasonic India Business Head, Air Conditioners Group Abhishek Verma, the industry penetration level is around 7 per cent in India and has been experiencing a surge in demand supported by factors such as an increase in disposable income, growing pace of urbanisation, and technological advancements.

"The industry holds immense growth potential and Panasonic is well aligned with these trends to capture the market opportunity," he said.

LG Electronics India Senior VP Sanjay Chitkara said the India Metrological Department had predicted this summer to see above-normal maximum and minimum temperatures in most parts of the country and expects energy-efficient ACs and first-time buyers to be "key growth drivers".

A report from TechSci Research valued the Indian AC market at USD 4.4 billion in 2023 and anticipated robust growth with a CAGR of 6.3 per cent through 2029.

The Indian AC market has witnessed significant growth and transformation in recent years, driven by factors such as rising temperatures, increasing urbanisation, and a growing middle-class population, it said.

Godrej Appliances Business Head and Executive Vice President Kamal Nandi said inverter ACs form the bulk of sales, while fixed speeds are now a much smaller segment.

"We expect higher levels of rural growth in the coming years, even in the more premium categories," he said.

BNP Paribas, in an industry report, said ACs attract the highest goods and services tax (GST) rate of 28 per cent, were perceived as a luxury good as they attracted the highest GST rate of 28 per cent.

"However, due to rising temperature levels and hot summers, AC are incrementally turning out to be a necessity. For example, Bengaluru city has emerged as a new market for AC brands owing to rising temperatures," it said.

Lloyd, the consumer durables brand from Havells India, which has set up a new manufacturing unit at Sri City, Andhra Pradesh, and is increasing its capacity by more than twofold, also expects to pick up from April.

AC sales have started on a positive note in the southern markets, where demand generally starts from the middle of February, Havells India Executive Director Yogesh Kumar Gupta said.