Prolonged heatwave pushing demand for air conditioners

Prolonged heatwave pushing demand for air conditioners

With most parts of northwest and central India reeling under scorching temperatures, consumer durable firms expect record demand for cooling products such as air conditioners and refrigerators this year even as another round of price hike looms large amid rising raw material costs.

Major manufacturers also expect pent-up demand from the last two summer seasons that saw severe market disruptions because of the pandemic, and rising demand for air conditioners in tier 2 and tier 3 cities, to help them achieve a growth of up to 35% over last year.

“The pandemic as we all know had been very harsh on the business both for the industry and the brand. But as the pandemic started coming under control, things started to look up. This year we are aiming for more than 20% growth rate over 2019 for both room ACs as well as commercial ACs segments…supported by various factors such as continued trend of remote working, harsh summers and increasing purchase capacity of consumers,” Gurmeet Singh, CMD, Johnson Controls-Hitachi Air Conditioning India, said.

Echoing similar views, Deepak Bansal, Vice-President – Home Appliances and Air-Conditioners, LG Electronics, India, told The Hindu that the last quarter has been very promising for the firm owing to good demand for air-conditioners and refrigerators. “The industry is witnessing an unprecedented demand for ACs owing to the heatwave in India. In 2022, we are expecting growth of over 30% in the home appliances segment backed by strong growth in the cooling products in the first half of the year,” he said.

Mr. Bansal added that while the prolonged heatwave has definitely boosted the demand for cooling products, their smart home appliances backed by Artificial Intelligence have also been much sought after. In 2021, the company saw a strong growth of more than 20% in the home appliances and air conditioner segment recording revenue of ₹15,000 crore.

Manish Sharma, Chairman & CEO, Panasonic India & SA said, this year, the company is expecting robust sales from all regions, primarily due to the pent-up demand from the last year. “We have seen record growth for ACs this March due to pent-up demand. We have recorded a growth of nearly 142% in the month of March 2022 vs March 2019. We anticipate an overall 30-35% growth this summer over last year for ACs,” he said.

For refrigerators too, Panasonic has seen a growth of 11% as compared to FY2019 and is expecting to grow at 10-12% this year as well.

However, increased demand may also lead to shortage of these products given that manufacturers are already facing supply constraints and a possibility of another round of price hikes due to rising material and logistics costs.

“With the growing demand, there is increased pressure on the common resources for the industry. Globally, the supply chain is feeling the strain. Adding to the challenge, are the increase in costs of raw materials, transportation and other inputs. The brands are constantly trying to work around these factors and deliver the best possible solution to the consumers,” Mr. Singh said.

Asked if more price increases are likely, he said that input costs are undoubtedly rising, and brands try to rationalise the costs as much as possible and develop cutting edge technology that produces longer-lasting solutions. But as the factors that are acting costs are beyond brand control, some costs have to be translated towards the consumers.

Panasonic has already increased the prices of its Air Conditioners by around 6-8% in January 2022, and is “evaluating the input cost changes before we take a decision on another price hike”. LG Electronics too is “closely monitoring the situation” as the increase in raw material costs has been unprecedented.

Saurabh Baishakhia, President, Appliances, Usha International, said, the company is witnessing a continuous rise in demand for cooling appliances as summers have begun earlier than expected, and many regions in India are already experiencing very high temperatures. However, he added, “The cooler industry has been under pressure due to increase in commodity costs across the board since last year and the prices have increased in the range of 5-8%”.