India's AC Market Soars Amid Heatwave, Manufacturers Airlifting Components

India: Air-conditioning manufacturers in India are airlifting components, such as compressors and crossflow fans/motors, to meet the surge in demand caused by the ongoing heatwave across the country, which has driven AC sales to record levels. Some companies have increased prices by 4-5% to offset the rising costs of metals like copper and aluminium. Installations are experiencing delays of a week or more in several areas due to the overwhelmed service network.

The room air-conditioning industry has grown by about 50% in the last three months, surpassing expectations. The industry is still developing its component backup in India under the PLI scheme, leading to the current shortage of parts. To address this, manufacturers are airlifting components from overseas to meet the market demand driven by the extended and hottest summer in years.

The industry was prepared for up to 25-30% growth, but the actual demand surge of 70-80% has led to significant shortages. Companies are either airlifting components or risking lost sales. The growth rates in March, April, and May were 40%, 80%, and 70% respectively, with June expected to see another 70% increase.

Typically, companies maintain inventory for three months of advance production, usually shipped via ocean freight. However, the sudden spike in demand has necessitated emergency airlifts. The room AC industry remains heavily import-dependent, with around 60-65% of product value coming from imports, including compressors, PCBs, and fan motors from markets like Taiwan, China, Thailand, and Malaysia.

To mitigate some of these challenges, companies like Daikin have established local manufacturing facilities, which have helped in certain areas like compressor production. However, issues with PCBs and smaller components still required airlifting from Japan. Due to the increase in metal prices, manufacturers anticipate a 2-3% price hike for ACs and refrigerators.

Godrej has noted a 20% increase in copper and aluminium prices, which will affect production costs for Q2. Similarly, rising metal prices have pressured margins, leading to a projected 4-5% increase in AC prices.

The industry body CEAMA estimates the Indian AC industry to produce around 14 million units this year. Despite the surge in summer sales, there is an expectation that festival demand might be lower this year due to the current market conditions.

Source: Hindustan Times