AC Makers To Hike Prices To Offset Rising Input Costs
Employees work on the outdoor units of split system air conditioners on an assembly line. Photographer: Prashanth Vishwanathan/Bloomberg

AC Makers To Hike Prices To Offset Rising Input Costs

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Leading air-conditioner 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% before the crucial summer season starts.

Leading players such as Voltas Ltd., Daikin, LG, Panasonic, Haier, Blue Star Ltd. and Samsung are expecting a high double-digit growth, as they’re betting on pent-up demand, sweltering summer and continuance of remote working, spurring 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’re also providing no-cost EMI, cashback and easy accessibility to boost sales.

Daikin Airconditioning is going to increase the prices by 3 to 5% 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,” Kanwal Jeet Jawa, managing director and chief executive officer of Daikin Airconditioning India, told PTI. “We’re expecting that even if there is some price increase, demand would be there.”

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

He further said: "For the last 3-4 months, we are witnessing a 25% 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 prices.

“We have already implemented a price hike in the AC category,” said Voltas Managing Director and Chief Executive Pradeep Bakshi. “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.”

Blue Star, which has already increased prices from 5 to 8% in January, said it would increase by around 3% from April. Yet, it expects around 30% growth this season in comparison to 2019, according to its Managing Director B Thiagarajan.

However, he said due to price increase, sales of high-end products would not grow but those of low-end and affordable products would go up.

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

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

LG Electronics India vice president of home appliances Vijay Babu said this season, as per the initial prediction by Indian met department, the country is going to have a scorching summer. Pent-up demand and work from home would be a major factor, he said.

“We are expecting 40 to 45% growth by value,” he said, adding: “Both of our 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% over last year and above 15% over 2019 and we’re confident of beating market expectations,” said Rajeev Bhutani, senior vice president of HVAC division of Samsung India’s consumer electronics business.

According to the Consumer Electronics and Appliances Manufacturers Association, the overall impact of the increase in the input material is between 10 to 12%.

“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,” the association’s President Kamal Nandi said. “Another 5 to 6% price increase should happen in the month of April.”

When being asked about the growth, Nandi said "we are expecting a growth of 20% over 2019 for air conditioners.”

This year, companies are expecting growth in sales from tier III, IV & V towns as markets in these regions were less impacted by the pandemic as well as due to good monsoon and availability of power after the government’s rural electricification 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.

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