India’s AC Industry Faces Potential Summer Supply Crunch Amid Compressor Shortage
INDIA: Air conditioner (AC) manufacturers may struggle to meet peak summer demand if it surpasses a certain threshold, as domestic compressor production remains insufficient. The country currently produces around 6 million compressors annually, far below the estimated requirement of 10 million units. This shortfall is primarily covered by imports, mainly from China. However, delays in the Bureau of Indian Standards (BIS) certification process continue to disrupt production and supply chains, industry executives said.
According to industry estimates, AC demand is projected to grow at an annual rate of 19-20% until 2030, with a 20% increase expected this year, bringing total demand to 12-13 million units. While the compressor supply chain can handle moderate demand fluctuations, a sharp spike—like the 55% surge in April-May 2024—could strain availability. Blue Star’s managing director, B Thiagarajan, noted that the domestic supply chain can accommodate up to a 25% annual increase in demand. However, with manufacturers planning for a growth of 20-25%, an unexpected surge could lead to shortages. Currently, India has four major compressor manufacturers: China’s GMCC, LG Electronics, Highly India, and Daikin.
A Daikin representative stated that the company, which produces about 3 million compressors annually, can manage supply if demand rises by 20% or less. Daikin has also partnered with Rechi Precision to establish a new rotary compressor facility, but production will begin only in late 2025, making it too late to resolve immediate shortages. Adding to manufacturers’ concerns, the Bureau of Energy Efficiency (BEE) has announced stricter energy efficiency standards for ACs, set to take effect on January 1, 2026, which could further complicate production planning and inventory management.
To address long-term supply constraints, the government introduced a production-linked incentive (PLI) scheme for white goods in 2021, with an outlay of ₹6,238 crore aimed at boosting domestic manufacturing of key AC components, including compressors. However, industry response has been lukewarm, as many manufacturers remain hesitant due to cost concerns. Thiagarajan noted that Blue Star, which sells approximately 1.5 million AC units annually, would only consider setting up a compressor plant once sales reach 2 million units. Other leading brands like Voltas and Havells also continue to rely heavily on imports. Additionally, rising copper and aluminium prices could further discourage domestic compressor production, making imports a more cost-effective option, industry experts warned.
Source: Financial Express