India’s Air Conditioning Industry: From Import Dependence to a Self-Reliant Manufacturing Hub
- brg_news_room
- Nov 24
- 5 min read
India's air conditioning industry is undergoing a significant transformation. Due to rising consumer demand and government initiatives like the Production Linked Incentive Scheme for Air Conditioning and Components and the Make in India campaign, companies are increasingly prioritizing local manufacturing and expanding their production capacity. India's AC market, once heavily reliant on imports, is quickly evolving into a self-sufficient manufacturing hub. Both domestic and global brands are investing heavily in factories, technology, and component production.
Growing Market Potential
Despite India's warm climate, air conditioner penetration is still low, at only about 7% of households. This indicates substantial growth potential over the next decade, as increasing incomes, a growing middle class, and rapid urbanization drive demand for residential and commercial cooling solutions.
At the same time, global supply chain disruptions and high import costs have accelerated the shift toward domestic production. Government incentives under the PLI scheme are encouraging localization, especially for high-value components such as compressors, motors, and PCBs. Domestic production has expanded sharply in recent years, reflecting the industry’s growing capacity and progress toward self-sufficiency in air conditioner manufacturing.
Leading Players Expanding Local Manufacturing
Daikin India: Building a Global Hub
In September 2021, Daikin India signed a land lease to build its third manufacturing plant in Sri City, Andhra Pradesh, which officially opened in December 2023. Along with its earlier Neemrana facility in Rajasthan, which also houses the Daikin Japanese Institute of Manufacturing Excellence (DJIME) and a 2025 R&D centre for HVAC innovation, Daikin's total capacity now reaches about 2.5 million units annually. The company plans to localize up to 75% of production and boost exports by 2030, reinforcing India as a global hub for its AC and compressor manufacturing.
Voltas Ltd: Strengthening “Make in India”
Voltas, part of the Tata Group, broke ground in May 2023 on a ₹500 crore (US$60 million) air conditioner plant in Madharapakkam, Tiruvallur, Tamil Nadu. The facility, which will initially produce Room Air Conditioners, complements existing plants in Pantnagar, Waghodia, and Sanand. Now nearing full operation, the plant is expected to strengthen Voltas’ presence in South India and generate over 1,500 jobs, reinforcing the company’s commitment to “Make in India.”
LG Electronics India: A Step Toward Self-Reliance
In March 2023, LG Electronics India opened a dual-inverter air conditioner compressor line at its Greater Noida facility. With an investment of about ₹100 crore (US$ 11.2 Million), this line has an annual capacity of over 1 million units, marking a shift from importing compressors to producing them locally. Building on this, in May 2025, LG began construction of its third manufacturing facility at Sri City, Andhra Pradesh, with an investment of approximately ₹5,001 crore (US$ 602 million). Spread over 247 acres, the plant is expected to start production by the end of 2026, initially producing air conditioners and AC compressors with planned capacities of 1.5 million AC units and 2 million compressors annually. Positioned alongside its existing facilities in Greater Noida and Pune, this expansion reinforces LG’s strategy to localize production, strengthen its supply chain in South India, and support exports.
Havells India (Lloyd): Scaling Production
On June 14, 2024, Havells India announced an investment of ₹50–60 crore (US$6–7.2 million) to increase AC manufacturing capacity at its Ghiloth (Rajasthan) and Sri City (Andhra Pradesh) plants. The expansion will boost output from roughly 0.9–1.12 million units per site to 1.5 million units annually at each location.
Blue Star Ltd: Smart and Sustainable Growth
Blue Star continues to expand its production at Sri City and Wada. Currently manufacturing 1.4 million room ACs a year, the company plans to raise capacity to 1.8 million units in the near future.
Haier Appliances India: Building a Manufacturing Powerhouse
Haier India has invested significantly in its Greater Noida Industrial Park, a state-of-the-art integrated facility inaugurated in 2022. The plant has the capacity to manufacture up to 1 million AC units annually, along with refrigerators and washing machines. Haier aims to make the site a hub for exports across South Asia, underlining its long-term commitment to India as a key manufacturing base.
Mitsubishi Electric India: First AC & Compressor Unit in India
Mitsubishi Electric India has constructed its first air‑conditioner and compressor manufacturing facility in India, located at the Origins by Mahindra industrial park in Chennai, Tamil Nadu, with an investment of around ₹1,891 crore (US$222 million). The plant is designed to produce 300,000 room‑AC units and 650,000 compressors annually and is expected to commence mass production shortly. This facility will support local employment, strengthen supply chains, and enable expansion into Tier II and III cities through branded showrooms called Hiroba.
Panasonic India: Strategic Expansion and Localisation
Panasonic is expanding its presence in India’s air-conditioning market, targeting significant growth in FY2025–26. India currently contributes less than 2% of global revenue but remains a strategic market. The company operates multiple factories and innovation centers in India producing air conditioners and related components. Consumer ACs account for a significant portion of its Indian revenue, and the company plans to double exports within three years, including AC units to South Asian markets. Observing trends such as premiumisation and rising demand for advanced cooling solutions, Panasonic is introducing technology-driven products tailored to the Indian market.
Godrej Appliances: Expanding Production
Godrej Appliances is investing around ₹100 crore (US$ 11.2 Million) in its AC plants at Shirwal (Maharashtra) and Mohali (Punjab). By the end of 2025, these plants are expected to produce 800,000 units annually, showing the company’s commitment to sustainable cooling solutions.
Sri City: India’s AC Manufacturing Heart
Sri City in Andhra Pradesh has quickly become the center of India's air conditioning manufacturing ecosystem. It hosts major players like Daikin and Blue Star, along with several component suppliers. Together, they account for nearly half of India’s total AC production. By 2027, Sri City’s contribution is expected to reach around 60%, making it the country’s largest HVAC manufacturing hub. The region’s infrastructure, skilled workforce, and logistical advantages are fostering a thriving ecosystem for both OEMs and component suppliers.
Strategic Implications
The rise in local manufacturing signifies a major shift in India’s HVAC industry. Companies are lessening their reliance on imports by producing key components like compressors, coils, and PCBs locally. India is no longer just a consumer market; it is becoming a global manufacturing and export center for AC systems.
Additionally, these new facilities are adopting green and smart manufacturing techniques, supporting India’s climate goals while enhancing product efficiency. The expansion is also creating thousands of jobs, further solidifying India’s role in the global cooling supply chain.
Challenges to Domestic Growth
Despite the strong push for local manufacturing, several challenges could limit growth. High input costs, including raw materials and critical components, may keep production expensive, especially for budget models. Limited availability of skilled labor and regional infrastructure bottlenecks can slow ramp-up at new facilities. Additionally, delays or partial implementation of government initiatives like the PLI scheme may reduce the pace of component localization and investment. Addressing these constraints will be crucial for India to fully realize its potential as a self-reliant AC manufacturing and export hub.
Find out more in our latest edition of Indian HVAC report.
Source: Geetika Tandon, BRG Research
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