Korean major Samsung, the second largest AC player in the country, has decided to stop production of window air conditioners. Mahesh Krishnan, vice president, home appliances of the company, says it does not make any sense to continue with window ACs as the price gap with split ACs has narrowed considerably. Samsung has seen split ACs accounting for 85 per cent of its total AC sales in the current financial year. That number will become 100 per cent next year.
The story is the same for most others — from LG to Daikin to Hitachi — as split ACs accounted for an average 80 per cent of the 3.3 million unit-a-year air conditioner market in India.
Apart from other reasons, the main trigger for consumers moving towards split ACs is the reduction in price differential. Kanwaljeet Jawa, managing director of the world’s number one AC Company, Daikin, says that the differential now is even less than 20 per cent compared to 40-45 per cent earlier. Daikin never entered the window AC market in India as the margins are low and the segment is dying in any case.
|NO SPLIT VERDICT, THIS
|Split AC sales as % to
total AC sales in 2011
|Split AC sales as % to
total AC sales in 2012 *
Samsung is also looking at the premium end of the AC market where obviously window versions have no place. The company launched 39 split AC models this season and expects a quarter of its sales to come from the 5-star rated split models (5-star conveys most efficient power consumption). Samsung has an ambitious target: it wants to sell 500,000 split ACs in 2012, a growth of over 40 per cent as compared to last year.
Market leader LG says that the window segment is at an inflection point where there is no innovation possible and the entire market would shift to splits within three years. Saurabh Baisakhiya, business sales head - air conditioners, LG India, says the window AC market is now limited to a few customers who either want to upgrade to a better-rated window AC, or the entry level sub-Rs 20,000 customer who wants to fulfill the functional need of basic cooling.” Last year, window ACs accounted for just 30 per cent of LG’s total AC sales.
Baisakhiya says that there are practical reasons also for this. Almost all new constructions that have come up in the last few years don’t have provision for window ACs. This is denting demand in a big way. LG thus is selling window ACs mostly in Tier-II and III towns and has launched more power efficient units for these markets this year.
Japanese major Hitachi says that conversely what’s happening is that Chinese window AC manufacturers, who supply to smaller players in India, are seeing their price go up. And this has made splits more attractive, according to Gurmeet Singh, head-sales and business planning, at Hitachi Home and Life Solutions India. The window segment contributed 28 per cent to Hitachi’s total AC sales in India last year.
This of course does not mean that sales of window ACs will disappear. Some like Voltas say it may be a shrinking segment (overall decline of 30 per cent), but the base is still quite large. There are still many buyers who are moving from coolers to ACs for the first time. Pradeep Bakshi, executive VP and COO, unitary cooling products, Voltas, says, “With the category witnessing an exponential penetration growth in the last two years and the entry of new brands, windows as a segment provides opportunities to tap into the first time buyers in tier II and III markets.”