Bangladesh AC Market Expected to Take a Hit in 2025 After Years of Growth

Bangladesh’s air-conditioning (AC) market expanded rapidly from 2021 onwards, driven by rising incomes, fast urbanisation, and increasingly hotter summers that made cooling a necessity rather than a luxury. Annual sales rose sharply from 2021, nearly doubling by 2024, reflecting the sector’s swift transformation into a large and dynamic industry. The residential segment contributed the largest share of market value, while commercial systems played a smaller but significant role. Over 80% of demand was met through local assembly, which helped reduce prices and expand access across the country.

Split-type inverter models dominated the market, with 1.5-Ton units leading demand and 1-ton models following closely behind. Domestic producers such as Walton, Gree, and Singer fulfilled the majority of market needs, underscoring the success of local manufacturing. However, air-conditioning ownership remained limited to a small share of households, indicating significant untapped potential for future growth.

Rising summer temperatures and increasing household incomes were major drivers of air conditioner demand in Bangladesh, as hotter weather and improved living standards led families to view cooling systems as essential rather than luxury items. Over the past decade, per capita income rose significantly, expanding the middle-class base that could afford such appliances. Government incentives and lower import duties reduced costs, making units more affordable, while consumer financing and instalment plans allowed many households to spread payments over one to two years, easing upfront financial burdens. Urbanisation and infrastructure development also contributed, as wider electricity access enabled AC adoption in smaller towns and semi-urban centers, including schools, hospitals, and religious institutions. At the same time, technological advances such as inverter technology and eco-friendly refrigerants like R-32 improved energy efficiency, cutting power consumption by up to half and making units more cost-effective and attractive to both budget-conscious and environmentally aware consumers.

After several years of rapid expansion, the market is expected to witness a slowdown in 2025 as overall demand weakens amid a mix of seasonal, economic, and structural challenges. Having previously thrived on rising incomes, urban growth, and technological advancement, the sector is expected to face headwinds that could impact both consumers and businesses. Softer household spending, coupled with potential delays in corporate and institutional purchases, is likely to weigh on the market’s earlier strong momentum.

Challenging Factors

• Mild Weather and Seasonal Weakness: The summer of 2025 turned out to be milder than usual, with average temperatures hovering around 32–33°C, several degrees below the typical seasonal peak. Rainfall during July and August exceeded historical averages by more than one-fifth, easing heat intensity and reducing the urgency to purchase new ACs. As a result, the traditional buying periods, particularly the hot pre-monsoon months and festive season, saw weaker demand.

• Inflation and Rising Costs: High inflation and a depreciating currency pushed up manufacturing and distribution costs. As prices climbed, many households deferred purchases due to tighter budgets and reduced purchasing power.

• Tax Policy Changes: In early 2025, the government proposed raising the value-added tax on AC manufacturing from 7.5% to 15%. The policy announcement dampened market sentiment and led to expectations of further price increases, discouraging both retailers and buyers. This measure added pressure to a market already dealing with rising production costs.

• Slower Corporate and Institutional Demand: The volatile political environment of 2025 created a chilling effect on businesses and overall sentiment. Companies and real estate developers held back on new investments, delaying infrastructure, commercial projects, and office developments. As a result, bulk orders from corporate clients and public institutions, previously a steady driver of sales, declined sharply, further weighing on demand.

• Market Saturation and Competitive Pressure: After a decade of rapid growth, the market began to show signs of saturation. Competition among local and foreign brands intensified, leading to price wars and thinner margins. High-end brands faced particular pressure as consumers shifted toward cheaper locally assembled or Chinese models. Companies such as Singer Bangladesh reported a drop in AC sales, reflecting the overall slowdown and tougher market dynamics.

Impact on Residential and Commercial Segments

The residential segment, which had been driving most of the growth, began to experience a slowdown in 2025. Rising costs and economic uncertainty prompted many middle-income households to delay non-essential purchases. Demand in smaller towns and semi-urban areas, previously a key growth frontier, weakened through the year, and by the end of 2025, it is expected that these segments will continue to show subdued growth as households remain cautious amid high electricity bills and persistent inflation.

The commercial and industrial segments also started facing setbacks earlier in 2025. Many new commercial projects were postponed or downsized, directly reducing demand for central cooling systems. Corporate offices and shopping malls scaled back upgrades, while hotels and restaurants delayed renovation plans amid slower consumer spending. The construction slowdown, combined with high import costs for large systems, is expected to lead to continued contraction in this category by the end of 2025.

Future Outlook

Despite the expected downturn in 2025, the long-term outlook for Bangladesh’s AC market remains positive. With only about 2–3% household penetration, the potential for expansion is significant. Rising temperatures due to climate change, continued urban growth, and improved electrification will sustain underlying demand. Industry experts expect that if economic stability returns and the weather pattern normalises, sales could rebound strongly from 2026 onwards.

Local manufacturers are expected to continue benefiting from government incentives for domestic production, which will help reduce import dependency and keep prices competitive. Energy-efficient inverter models and smart home integrations are likely to dominate future growth, as consumers increasingly value sustainability and long-term cost savings.

However, the market’s recovery pace will depend on broader economic factors, especially inflation control, exchange-rate stability, and fiscal policy decisions such as VAT rates. If these challenges are managed effectively, Bangladesh’s AC market could again see annual double-digit growth and evolve into a billion-dollar industry by the end of the decade.

Find out more in our latest edition Bangladesh AC and Ventilation reports

Source: Aashutosh Chauhan, BRG Research

---

To purchase the detailed report, go to our online shop: BRG Heating and Cooling Report

India

Bangladesh

For more information, please contact us at:

Email: europe@brggroup.com

Tel: + 44 (0) 20 8832 7860