AC Demand Expected to Rise Before New Efficiency Norms

New Efficiency Norms

India: Blue Star notes that high inventory levels in the AC industry may ease by December as price-conscious consumers advance purchases ahead of new Bureau of Energy Efficiency norms taking effect in January, which are expected to push AC prices up by 5–7%. While tertiary sales have improved after GST was reduced from 28% to 18%, primary sales from manufacturers to dealers remain subdued. The company sees an opportunity in stricter efficiency requirements despite cost increases of up to 10%, aiming to keep price hikes within 5–7% through greater indigenisation and a stronger local supply chain. With around 25 brands in the Indian AC market, the firm anticipates a shake-out within the next two to three years, driven by varied investment levels in R&D and manufacturing.

The company recently expanded its manufacturing footprint with two new plants in Sri City, Andhra Pradesh, and Maharashtra, along with brownfield expansion in Dadra, adding to its nationwide network of seven facilities. While the Production-Linked Incentive scheme and GST cuts have supported the sector, the company acknowledges that the PLI scheme has simultaneously led to excess industry capacity, creating price pressure even as greater domestic capacity helps attract more component suppliers in the long run.

Source: The Financial Express