Unchanged AC prices to ensure summers are cooler this year

AC makers retain current prices due to cheaper Chinese components and low commodity prices

Cosumers can look forward to cooler summers this year, as prices of air-conditioners (ACs) are unlikely to move up. Low commodity prices as well as cheaper components from China have given room for AC makers to hold on to the current prices even as rupee has devalued vis-a-vis the US dollar.

C P Mukundan Menon, executive vice president, airconditioning and refrigeration products sales group, Blue Star Ltd said that the commodity prices have been down for a while now, and prices of components from China too are down by at least 5-10%.

"Prices of copper and steel, that constitute nearly 10-15% of an AC machine, are down. Add to this the recent slowdown in the Chinese economy has meant that components that come from China are also cheaper by 5-10% at least," he explained.

Menon, however, added in the same breath that the cost savings thus made has been neutralised due to the rupee-dollar fluctuation. The dollar has gained vis-a-vis the rupee in the past few months which has, in turn, pushed up the landed costs of components etc.

As such Chinese components account for nearly 60-70% of ACs, he informed. Bulk of the AC sales happen during summer months; between January to June nearly 70% of the annual sales happen, while the second half of the year accounts for the balance 30% sales.

Sunil Shankar,product head, AC, MIRC Electronics that manufacturers of home appliances under the Onida brand too echoed the same thought. He added that the dollar which was around Rs 62-63 levels around the same time last year, is now hovering around Rs 66-67 levels.

"If the dollar breaches Rs 69-69.5 levels, then AC makers, would not be left with much option but to raise prices," Shankar said. Dollar prices are around Rs 66.5 at the moment.

There were no chances of prices coming down for AC machines, however, as all makers seemed to agree on one point that the savings made due to lower component prices have been offset by the rising dollar.

Sanjeev Bakshi, country head, AC, Videocon Industries Ltd said that as far as components are concerned, the prices are down by at least 10% in the January to March quarter this year compared to the same quarter last year.

He added that nearly 60% of the components of an AC machine are imported, either from China or countries like Thailand and Taiwan. On account of the slowdown in China, the prices of components from the Asian belt are also low, claimed makers.

Bakshi also felt that if makers at all increase prices owing to the rising dollar, it should not as such impact demand.

The room AC market in the country, estimated to be around 4 million units per year at the moment, is clocking a 15% compounded growth rate. It is estimated to double by 2020, and touch a size of around 8 million units pa.The AC market is roughly pegged at around Rs 10,500 crore at the moment.