The Indian air conditioner market has witnessed a steady growth. The perception of the Indian middle class towards the product has shifted. A large section of the urban middle class considers it as more of a necessity rather than a luxury item given the warm and humid Indian climate.
The fast spiralling demand from the residential sector owing to reduction in prices has made the manufacturers aim high in the Indian air conditioner market. The commercial segment is also catching up with the increase in demand of commercial plots, offices, stores, and business apartments.
At present, northern India accounts for the largest share of the air conditioners market, followed closely by the southern states. The country has emerged as a prominent manufacturing hub for air conditioners in the SAARC region, as global players have set up manufacturing units.
According to a recently published TechSci Research report titled “India Air Conditioners Market Forecast and Opportunities, 2020”, the country’s air conditioner market is projected to grow at a compound annual growth rate (CAGR) of over 10% during 2015-20. Currently, the market for air conditioners in India is dominated by Voltas, followed by LG, Daikin, and Samsung.
Karan Chechi, Research Director with TechSci Research, said that on account of rising per capita income, changing consumer lifestyle, and the prevailing hot and humid climate, the demand for air conditioners is expected to rise. Implementation of minimum energy efficiency performance standards by the Bureau of Energy Efficiency (BEE) and the need for cost-effective air conditioning solutions is expected to influence the demand for energy-efficient air conditioners in India.
According to the National Council of Applied Economic Research (NCAER) findings, the number of middle-class households is expected to touch 53.3 million by 2015 from the current 31.4 million. By 2025, it is likely to grow to 113.8 million households. The NCAER states that only 52% of middle-class households in India possess air
conditioners, suggesting that the remaining 48% has not been penetrated. This bulging base of middle-class families
presents an immense opportunity for air conditioner
manufacturers in India. Another key customer segment to focus on for the long term can be the bottom-of-the-pyramid (BOP) section, which as per findings, contributed to only 9% of total private consumption.
The AC market in India is fragmented with more than 25 players. Voltas, Blue Star, Godrej, Videocon, Fedders Lloyd and Onida are some of the Indian manufacturers. The Japanese companies include Daikin, Hitachi, Fujitsu, General, Carrier, Toshiba, Panasonic, Mitsubishi Electric, Mitsubishi Heavy Industries and Sharp. Carrier, Trane and Whirlpool are the American multinationals. The Korean LG and Samsung are strong players. The Chinese majors, namely Carrier Midea and Haier, are also quite popular. Kenstar of the Videocon Group and IFB are yet to enter the market.
The vast array of technology present in the segment has aided consumers to make informed choices. Customers have developed a preference for energy-efficient models along with inverter ACs with green technology.
The ACs which are manufactured using R22 is likely to be banned from 2020. Accordingly, Daikin has gone ahead with R32 for fixed speed and inverter models. Panasonic, Hitachi, and Fujitsu General are likely to follow suit. Blue Star is likely to come up with a pilot batch with R32. Godrej has been manufacturing models using R290.
BEE has made its star labelling norms more stringent. It is also considering discarding 1- and 2-star ratings, and re-rating 3- and 4-star as 1- and 2-star. It has also considered bringing inverter ACs into the same table as fixed speed air conditioners.
The BEE has also opened a dialogue with Refrigeration and Air Conditioning Manufacturers’ Association (RAMA) for voluntary star rating of inverter ACs, which may become mandatory for all fixed speed models in near future. State-run Energy Efficiency Services Limited (EESL) is also likely to assist consumers to replace old air conditioners with those which are at least 40% more energy-efficient with zero upfront payments.
The ESSL will also order the first lot of about two lakh air conditioners by March and would depend on manufacturers such as Voltas, Blue Star, Godrej, Daikin, Whirlpool, and Panasonic to make these super-efficient ACs. These ACs will be given on three-year equated monthly
instalments (EMIs) to users who would get their investment back through an estimated 30-40% saving in electricity bills over the next three years.