What Helped Air Conditioner Makers Buck The Trend Amid A Slowdown

Inverter air conditioners cushioned the makers of cooling appliances as they grappled with piled-up inventory and a slowing economy.Sales of inverter air conditioners, which vary their cooling or heating capacity by adjusting power supply to compressors, jumped over last year on account of falling prices and new energy efficiency standards that kicked in 2018. That aided the revenue growth of the cooling segment for appliance makers in the first quarter ended June.The share of inverter air conditioners to total industry sales, Crisil said, has jumped from 12 percent in 2016-17 to 40 percent as of March 2019. The Bureau of Energy Efficiency now estimates this share to increase to 50 percent by the end of next year..Higher sales of air conditioners come at a time when customers are spending less on biscuits to appliances and cars amid a slowdown in the economy. Consumer durables output contracted for the second straight month in June. And the industry went into this summer with a huge pile-up of stock as demand fell last summer on account of unseasonal rains and energy-rating changes—according to Energy Conservation Building Code Rules, 2018, only air conditioners with inverter technology will be rated four and five stars. An extended cold wave had aggravated their woes earlier in the year.But a fall in prices of inverter air conditioners helped revive overall sales of the companies in the first quarter ended June—a seasonally strong period due to the onset of summer. The price difference between inverter and regular split air conditioners, according to brokerage Motilal Oswal, has now reduced to Rs 1,000-1,500 from Rs 3,000-4,000..“Improving standards of Bureau of Energy Efficiency and focus on promoting inverter air conditioners is a huge opportunity for companies that have a large line-up of energy-efficient products,” Gurmeet Singh, chairman and managing director of Johnson Controls-Hitachi Air Conditioning Ltd., said in the company’s annual report.Korea’s LG Electronics Inc was the first company to completely shift to inverter technology in January 2017, Motilal Oswal said in a report, and since then it has occupied nearly 50 percent share in the market. But companies like Daikin Industries Ltd., Voltas Ltd. and Lloyds (Havells India Ltd.) have started making inroads..Almost 80 percent of air conditioners sold in the metros have inverter technology, Nilesh Gupta, managing partner at electronics retailer Vijay Sales, told BloombergQuint. “With compressor prices becoming higher next year, the entire market will shift towards the inverter segment. Also, consumers prefer inverter air conditioners because of comfort as temperatures are maintained even when the power fluctuates.”VoltasThe inverter segment accounted for nearly half of the total air conditioner sales in the financial year ended March 2019, the company said in a conference call with analysts after the first quarter. The segment’s revenue jumped to Rs 1,749 crore in 2018-19 from Rs 1,191 crore a year ago.Market leader Voltas Ltd. has scaled its presence in the inverter air conditioner segment and is growing faster than the industry’s 22 percent rate, Chirag Muchhala, research analyst at Nirmal Bang, said in a report.Blue StarBlue Star Ltd. expects inverter air conditioners to constitute about 60 percent of its total sales in the ongoing financial year, according to B Thiagarajan, managing director at the company.As volumes for this segment rose, prices have been coming down and margins have stabilised between fixed systems and inverter systems, he told BloombergQuint, adding demand increased for 1.5-ton air-conditioners in the inverter segment..Still, according to Thiagarajan, traction was seen for three star-rated (low-end) air-conditioners due to a dip in consumer spending in the quarter ended June.HitachiThe Japanese brand’s sales of inverter air conditioners stood at 66 percent in 2018-19 compared with 22 percent a year ago, according to its annual report.Antique Stock Broking expects the company’s market share in the overall air conditioner segment to improve from 10-11 percent to about 20 percent over the next few years, given the structural changes in the room AC business.

What Helped Air Conditioner Makers Buck The Trend Amid A Slowdown

Sales of air conditioners revived in seasonally strong April-June period, driven by inverter air conditioners.

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