AC industry bets on June to make a summer killing

With air-conditioner sales adversely hit this year by an erratic and late summer, consumer electronic companies are now counting on June as the best bet to rake in the moolah.

The air-conditioner (AC) segment this summer saw nearly flat growth until April-end. However, sales picked up from May as the temperatures across India soared.

"The sales during April were damp. However, the AC market has started reviving from May onwards and we hope that sales during June will be good," head of AC business at LG India Saurabh Baisakhaia told IANS.

The company, which holds a 22 percent market share in the AC segment, has managed to complete 90 percent of its target by May-end. However, Baisakhaia and other industry players are in anguish over the sales figures.

"With the monsoon expected to hit on time, the overall response from this segment is anticipated to be weak," Pradeep Bakshi, president and chief operations officer of the unitary products business group at Voltas Limited, told IANS.

Sanjeev Bakshi, COO of the AC division at Videocon, is also expecting the growth in the overall industry during the ongoing summer to be flat on account of the weather.

The industry, however, is hoping its sales figure targets in the north, northwest and central India - which contributes over one-third of AC sales - during the monsoon will drive the market in June.

"About the performance of the market, I am cautiously optimistic," Baisakhaia said.

In case the monsoon doesn't arrive on time or the projected shortfall in rain turns out to be true, the industry may grow at 15-20 percent in the May-June period, with the overall industry growth during January-June projected at 10 percent.

"Monsoons are becoming unpredictable. It directly affects the temperature, air pressure and humidity," Sanjeev Bakshi said.

He was confident of a surge in the demand for ACs in Rajasthan, Gujarat, parts of Maharashtra and central India during the monsoon period because the temperature would shoot up even in case of normal rainfall.

The AC companies said the peak summer season - the April-May-June fiscal quarter - accounts for about 40-45 percent of total AC sales, which were largely hit. Industry sales went down by as much as 18 percent during April while the overall growth during January-May was stated to be in the range of 8-10 percent.

The January-June period, often termed by AC companies as H1, accounts for 70 percent of annual sales.

LG said post the H1 period, besides central and north India, the major growth was projected in the south. Interestingly, among all the AC players, Godrej Appliances and Whirlpool get their highest revenue share from south India, the former earning 36 percent from the region.

A majority of the AC companies said the three-star category and the split segment are dominating the sales and consumers are fast moving over to energy efficient ACs.

"The preference for formats such as Splits is quite apparent and window ACs continue to lose ground. Within Splits, relatively new technologies such as inverter, have begun to find acceptance and account for approximately 10 percent of the split format", vice president of corporate affairs and strategy for south Asia at Whirlpool India, Shantanu Dasupta, said.

Anup Bhargava, product head of AC division at Godrej Appliances, echoed the sentiment.

"Window ACs are declining and at present have a market share of 16 percent. This is because the price difference between split ACs and window ACs is narrowing,", Bhargava told IANS, adding the five star ACs have a 22 percent market share. The market share of three star ACs is 65 percent.

He said energy efficiency, additional warranty and financing options will drive the market during June-July and the near future.

"Although financing schemes were available before, the terms are easing. However, it is the additional warranty which is driving the major sales", Bhargava said.

(Avishek Rakshit can be contacted at avishek.r@ians.in)