AC industry will witness a drop of 25% of sales: ASSOCHAM

Due to new energy efficient norms and hike in excise duty, the Air Conditioner (AC) industry will witness a drop of 25% of sales this season as air-conditioner makers have already increased their prices by 20-25% to pass on the burden to end consumers, apex industry body ASSOCHAM said today.

The prices are increased by most of manufacturers because of high energy efficiency labeling cost of 20-25%, according to a study titled ‘Demand of A.C Industry: An Analysis’ released by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).
                                                                                                     
The paper further highlights that the input costs have increased by over 15 per cent in the last three months. This is creating a significant pressure on the profitability of the industry. Therefore, the additional burden on the consumer is anywhere from Rs 3,000 to 7,000/- compared with last season.

Major companies are expecting a fall in sales this year, the leading consumer durable companies have already hiked prices of their products by almost 20 per cent since January. Other home appliance makers have also increased their prices by 20 per cent from this month onwards.

The price hike has also hit sales in rural and semi-urban market, which account for about 35 per cent of total sales. The overall room AC market in India is estimated at 4.2 million units last year and is valued at Rs 7,200 crore. It is growing at over 30 per cent annually. Split ACs, at present, dominates the AC industry with more than 68 per cent of all units sold last year.

D S Rawat, Secretary General ASSOCHAM said that new energy norms, scale higher will raise production cost by at least 15-20% and also push up prices of ACs. Components for energy efficient air-conditioner are far more expensive than regular air-conditioner. The most AC components are imported and assembled in India and the component suppliers have been increasing their prices. So, it is expected the new line of ACs this year will be priced much higher than the line-up last year.

The paper further highlights that the demand of ACs are not only coming from Tier-I cities, but also from Tier-II and Tier-III cities, clearly showing there is enough potential in the market. The growth has been frenetic, especially in the face of growing price competition, mentioned the paper.

The room air-conditioning segment is characterised by large players like Videocon, Carrier Aircon, LG, Samsung, Amtrex-Hitachi, etc. Videcon has been successful in the room AC segment, followed by Samsung and Hitachi, added the paper.

Rawat further points out that star rates, energy efficient models with superior features will continue to rate high on consumer demand. Gaining from ongoing technological advances they have been transformed into products that can provide health benefits as well.

"There are several factors favouring the Indian air-conditioner market growth are changing lifestyles, rise in disposable incomes and ease of availability will aid this growth. Besides, most people are now using air-conditioned cars, working in air-conditioned environment and becoming conscious about hygiene and pure air, add the ASSOCHAM paper.