Indian AC Makers Struggle with Summer Demand Amid Compressor Shortage
INDIA: Indian air conditioner (AC) manufacturers may struggle to meet peak summer demand due to insufficient domestic compressor production. While the country produces approximately 6 million compressors annually, it falls short of the estimated 10 million units required, with the shortfall primarily met through imports from China. Production schedules have also been disrupted by delays in the Bureau of Indian Standards (BIS) certification process.
AC demand in India is projected to grow by 19-20% annually until 2030, with a 20% increase expected in 2024, reaching 12-13 million units. While the supply chain can accommodate moderate increases, sudden spikes—such as the 55% surge in April-May 2024—could strain availability. B Thiagarajan, Managing Director of Blue Star, stated that the supply chain can manage up to a 25% rise in demand but would face shortages if growth exceeds this threshold.
India relies on four major compressor manufacturers: GMCC (China), LG Electronics, Highly India, and Daikin. Daikin, which produces 3 million compressors annually, can handle a 20% increase in demand, but its new compressor facility will not commence operations until late 2025, too late to address immediate shortages. Stockpiling AC units is risky due to the seasonal nature of sales, which can lead to high inventory costs. Adding to the complexity, the Bureau of Energy Efficiency (BEE) plans to introduce stricter efficiency standards in 2026, increasing production challenges.
To address long-term supply issues, the government launched a production-linked incentive (PLI) scheme in 2021 to boost domestic compressor manufacturing. Despite investments reaching Rs 10,478 crore, local value addition remains low at 15-20%, and new plants under the scheme will not begin production until 2025.
High costs and rising material prices—particularly for copper and aluminum—further discourage local compressor manufacturing. Major brands like Voltas and Havells continue to rely on imports, underscoring the ongoing challenges in establishing a robust domestic supply chain.
Source: Trak.in