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AC makers hope for a better summer, expect double-digit growth this fiscal

Leading brands such as LG, Onida, Hitachi and Voltas have pinned hopes on the air conditioning segment to drive revenues this year. Higher consumption in tier II, III markets and forecast of a harsh summer likely to drive AC sales

After two successive years of slowdown, India’s top air conditioner (AC) makers are expecting a strong double-digit growth this summer, on the back of high temperatures predicted by the Met department and increased consumption in tier I and II cities. Brands have also launched power-efficient models to drive growth.

Hoping for a promising summer, India’s AC industry is expected to grow at almost 10% this fiscal compared to last fiscal, major industry players said.

Pratyush Chinmoy, Head of Marketing, Onida, predicted that industry might move from the present 5.5 mn units in the current year to 7.7 mn units in 2020.

The industry is expecting double-digit growth in the upcoming years as well. Currently, AC penetration is only 5-6% in India.

In an interaction with, various brands such as LG, Onida, Hitachi and Voltas shared their marketing strategy to tap the market, North and South India being the biggest of them.

“The overall trend has shifted towards best and innovative technology. Power-efficient range of inverter ACs is the star of the season, witnessing a continual shift and focus of the industry and contributing 40% of overall industry sales, said Gurmeet Singh, Chairman and Managing Director, Johnson Controls-Hitachi Air Conditioning, India.

“Apart from that, windows ACs are on way out in major cities and split ACs are being used more (around 85%). Consumers have started talking about faster cooling, ACs with more technical prowess and voice recognition ACs too,” said Chinmoy.

With power cost going up, Kulbhushan Bhardwaj, Business Head, Air Conditioners of LG Electronics, said there is a major shift of consumers to five-star ACs. Last year, the industry average of five stars was 10%. This year, it is roughly 16-20%, and by the end of this year, it will touch to 30-35%. 

At the core of every demand, twin factors of convenience and affordability have been identified.

Consumption growth in tier II, III markets: 

Presently, AC penetration is only 5-6% in India. Initially, high consumption of electricity, high prices, and the mindset of AC being a premium consumer durable product were weighing on minds of the consumers. With a competitive market pushing products aggressively, there has been a gradual growth in demand.

Demand is growing in tier II and III cities. Due to extreme weather conditions, increasing electrification and easy finance, ACs have become more accessible and affordable, Singh said.

“Although metros and tier I cities are still buying more ACs, we are witnessing a high amount of demand from smaller cities, which aspire for the same level of comfort and lifestyle as their metro counterparts. These cities are going to the biggest drivers for ACs,” said Chinmoy.

While North derives window AC sales, the South dominates split ACs. Due to changing cities and changing demographics across the country, demand for air conditioners has gone up across regions. The brands shared different views on which zones are the demand drivers.

Bhardwaj said the South Indian market, which contributes around 30% of the market share, is the demand driver, followed by North, West and East. Singh said North is the demand driver, accounting for over one-third of overall sales.

Tech driving consumption shift and brands to launch smarter products

Factors like superior technology, energy efficiency do affect customers’ buying decisions. Customers now are getting more updated and aware of the benefits of opting for a superior technology product. It impacts the way overall brands and the industry develops, innovates and uses new technology.

Consumers are moving from stripped down basic features such as cooling, energy savings, compressor warranty and price to higher-end features such as convenience of controlling AC via an app, or their own voice. Also, apart from the regular warranty, people have been more alert to the brands’ extending warranty on indoor/outdoor/PCB/panel for a longer period of time. People expect their ACs to deliver higher capacity than the rated ones.

The more innovative a company is and adapts to the consumer shift of tastes, the more the chances of winning the AC war. Research goes on to better the line of products every year where every brand looks for faster cooling, higher efficiency, connectivity improvement, etc.

Keeping this in mind, Hitachi has come up with an extensive product line-up of 122 models (which includes split ACs, window ACs and cassette ACs), 35% of which is 5 Star and 72% inverter ACs this year. Keeping in mind environmental issues, the split AC (inverter and fixed included) line-up is green with R410A/R32 refrigerant. Its most energy efficient split air conditioner is Kashikoi 5100X++ (1.0 TR, 5 Star) with 6.1 ISEER.

According to Singh, Hitachi has been growing from strength to strength. “Our superior technology offerings have earned us the trust of our customers and an edge over others. We expect to grow much faster than the market and achieve nearly 15% growth this year.”

LG has been growing by almost 20% plus for the last two years. Bhardwaj shared that the brand has converted 100% into inverter ACs and would be targeting more than 60% five stars.

Apart from this, it is offering installation and finance schemes at discounted rates. It is also offering five-year insurance to its customers worth Rs 50,000.

Expected to grow at 35-40% this season compared to last, Onida is believed to grow faster than the industry, shared Chinmoy.

“Awareness is the key here when penetration is so low in India. We have taken care that we reach out to our distribution channel partners in all nook and corners of the country as much as possible. To support sales, we have gone whole hog on both our ATL and BTL campaigns. In-shop activities have been taken care of. Now we are spending heavily on commercials on TV, digital, outdoor, radio, etc,” he added.

Along with few key markets, the brand has also strengthened its inverter line-up of products, bringing in smarter products.

Voltas has launched its adjustable inverter ACs, which gives the consumer the option to run the AC at different tonnage/capacities, depending on the ambient heat or heat load in the room, hence leading to savings, said Deba Ghoshal, Head of Marketing, Voltas Limited. 

Haier India in its new product ranges has launched ACs that are energy efficient, and equipped with self-clean inverter technology (SCIT) and turbo cooling efficiency.

Witnessing a good industry growth, Livpure, a known brand in water purification, has also entered the AC portfolio, launching smart air conditioners powered by HEKA technology. It is equipped with Wi-Fi, IOT module and embedded with artificial intelligence and machine learning that will provide its users comfort preferences.

According to Hitachi, there are no major hurdles or challenges that would restrict the growth of the industry this year. 

Last year’s industry de-growth was attributed to weather conditions. Summers did not pick up so well in entire North and East India, and apart from this industry wasn’t able to read the consumer minds, shared Bhardwaj.

“Most of the brands were focusing on on-off air conditioners, which consume more electricity than inverter air conditioners, whereas customers wanted to switch to inverter ACs. The industry plan was to sell on-off, but customers wanted something else,” he added.

“There might be changes in GST structures and raw material fluctuations. Changes in energy efficiency are actually a welcome change. It works for both us and consumers,” said Chinmoy. 

Predicting upcoming trends for the industry, Chinmoy said, “Inverter ACs are going to be 100% of the entire pie. ACs are also going to be more affordable. The rising income levels and lower inflation will also help. We are hoping that the consumers buy at least one AC, then adding a second/third becomes all the more easier.”

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