AC makers set to hike prices to offset rising input costs; expect high double-digit growth this year


Leading AC manufacturers are betting on high double-digit growth this year even as they are firming up plans to increase prices of residential air conditioners by 5 to 8 per cent before the crucial summer season starts.

Leading players such as – Voltas, Daikin, LG, Panasonic, Haier, Blue Star and Samsung – are expecting a high double-digit growth, as they are betting on pent-up demand, sweltering summer and continuance of work from home, which will create demand for additional cooling products.

This season, several makers have introduced health and hygiene features in their range of ACs, claiming to protect their customers from the virus amid the pandemic. They are also providing no-cost EMI, cashback and easy accessibility to boost sales.

Daikin Airconditioning is going to increase the prices by 3 to 5 per cent this month as prices of metals and compressor, which are largely imported, have gone up.

“It will have some impact on the sales but the pent-up demand is there and summers would be hot this year. We are expecting that even if there is some price increase, demand would be there,” Daikin Airconditioning India MD & CEO Kanwal Jeet Jawa told PTI.

Panasonic, which is having “robust sales” across regions, primarily helped by the pent-up demand from last year, is also going for a price increase and expects a high double-digit growth this season.

“We are looking at market trends and plan to raise prices of ACs in the range of 6-8 per cent while refrigerators will see an increase in the range of 3 to 4 per cent. This is due to the rise in production cost due to the increasing cost of commodities in the last few months,” said Panasonic India and South Asia President and CEO Manish Sharma.

He further said: “For the last 3-4 months, we are witnessing a 25 per cent growth in air conditioners and are expecting the trend to continue this season too.”

Tata group firm Voltas, a leading player in the segment, has already increased the prices.

“We have already implemented a price hike in the AC category. Even though the recent increase in prices of raw materials have translated into price hikes for a variety of white goods, we remain optimistic about consumer sentiments, due to pent-up demand and a buoyant summer,” said Voltas Managing Director & CEO Pradeep Bakshi.

Blue Star, which has already increased prices from 5 to 8 per cent in January and would again increase by around 3 per cent from April. Despite that, the company expects around 30 per cent growth this season in comparison to 2019, said Blue Star Managing Director B Thiagarajan.

However, he added that due to price increase, high-end products would not grow but the sales of low-end affordable products would go up.

“It is not only from work from home, but people are largely staying and spending more time at home as they are not venturing out. They have to make their home comfortable… Instead of five-star, they would buy four-star or three- star,” he added.

Haier, which aims to corner 8 per cent of the residential AC segment said that a price hike is “inevitable” as commodity prices are up. “Price hike should be around 7-8 per cent depending upon the companies. We would also be doing a price increase before the end of this month,” said Haier Appliances India President Eric Braganza.

LG Electronics India VP- Home Appliances Vijay Babu said this season, as per the initial prediction by IMD, the country is going to have a scorching summer and pent-up demand and work from home would be a major factor.

“We are expecting 40 to 45 per cent growth by value,” he said, adding: “Our both manufacturing setups are working at full capacity and in anticipation of growth, we have been doing pre-production of ACs for the last four months to meet the spike in demand.”

Samsung, which has launched its 2021 range of air conditioners earlier this year with 51 models has seen strong sales so far across markets.

“The AC industry is expected to see a growth of over 70 per cent over last year and above 15 per cent over 2019 and we are confident of beating market expectations,” said Rajeev Bhutani, Senior Vice President, HVAC division, Consumer Electronics Business, Samsung India.

According to the Consumer Electronics and Appliances Manufacturers Association (CEAMA), the overall impact of the increase in the input material is between 10 to 12 per cent.

“But the whole price increase has not been affected yet. It is happening in phases. As of now, we have been able to take around 5 to 6 per cent across the brand. Another 5 to 6 per cent price increase should happen in the month of April,” said CEAMA President Kamal Nandi.

When being asked about the growth, Nandi said “we are expecting a growth of 20 per cent over 2019 for Air conditioners.”

This season LG and Voltas have launched ACs with UV LED systems, which ensures that the air supply is free from germs. While Panasonic has introduced nanoeX technology, which releases hydroxyl radicals contained in water, which are also known as “nature’s detergent” that are capable of inhibiting bacteria and viruses, including 99.99 per cent of the adhered novel coronavirus.

This year, the makers are expecting a decent growth in sales from the smaller tier III, IV & V towns as markets in these regions were less impacted by the pandemic, good monsoon and availability of power after the government”s rural electricity drive.

The Indian residential AC market is estimated to be around 7 to 7.5 million units per annum and over 15 companies compete in the segment.