AC companies likely to raise prices by 4-5% due to component shortages

As temperatures shoot up this month signalling an early onset of summer, sales of air conditioners (AC) are set to increase, with companies expected to hike the prices of ACs by 4-5 per cent due to component shortages.

 

Leading players like Haier and Bluestar and suppliers like EPack Durables have raised their production capacities to meet the 25-30 per cent rise in demand expected in the coming months.

 

For consumers, prices are expected to rise by ₹1,500- ₹2,000 due to shortage of compressors, copper tubes and quality control guidelines, industry insiders said, as companies were likely to pass on the increase in cost of production to the end users.

 

Bluestar has hiked prices by 3 per cent in February this year, while Haier is evaluating a 4-5 per cent hike in prices if the current conditions, including a highly volatile dollar, continue.

 

“Last year we saw unprecedented growth of 57 per cent. This year we anticipate a 25 per cent growth in sales of AC units on a high base. The industry sold almost 15 million units last year, of which we sold 1.5 million. This year, we anticipate a sale of 1.75 million units,” B Thiagarajan, managing director (MD), Bluestar, told Business Standard.

 

He added that the company was increasing its advertisement expenditure to ₹60 crore this year, while it has also raised its spends on innovation, research and development to ₹51 crore from ₹40 crore last year, which includes integrating AI into its products.

 

“This is to ensure better customer experience. Consumers now want artificial intelligence (AI)-enabled devices that understand their cooling behaviour. We are also researching how ACs can continue cooling in extreme heat conditions and save energy while doing so,” he said.

 

Haier, the third-biggest home appliances maker in the country, with a close to 10 per cent share in the AC market, is ramping up capacities to address increased demand in the coming period. The company has expanded its AC manufacturing capabilities and inaugurated a new injection molding facility at its Greater Noida plant.

 

In 2025, the company will invest ₹110 crore for a new PCBA factory, and further plans to commence a ₹700 crore air conditioner factory, to be operational in December 2026. That will allow them to manufacture an additional 2.5 million units from the current 1.5 million – taking the total capability to 4 million units.

 

“The AC market in India is underpenetrated with only an 11 per cent penetration. The segment will keep growing, driven by uncertain weather conditions, higher disposable incomes, especially after the last Budget, and technological innovation,” N S Satish, president, Haier Appliances, said.

 

In March, Haier has seen a more than 50 per cent growth in secondary sales and installation of air conditioners, which is expected to grow further.

 

“We expect the market to grow by at least 15 per cent this year. The Indian market has a clear advantage and we will leverage our in-house manufacturing and early investments to leverage that opportunity,” he added.

 

On an overall basis, the company expects to clock a revenue of ₹11,500 crore this year, up from ₹8,900 crore in 2024.

 

EPACK Durables, which manufactures ACs for leading companies like Voltas and Bluestar among others, stated that an ongoing compressor shortage, rising commodity prices, including copper, and delayed renewal of BIS certification on account of recently introduced mandatory quality norms for various products under the Quality Control Order (QCO) for Chinese exporters has led to some delay.

 

“This is expected to drive up prices by ₹1,000- ₹1,200 per AC unit for the end consumer. We expect to see a growth of 20-25 per cent this year, driven by extreme weather conditions, and continual demand that we saw in December too – a typical slow time for AC sales,” Ajay Singhania, MD and CEO, EPACK Durables told Business Standard.

 

The company manufactures 2.5 million AC sets in its three plants – Dehradun, Rajasthan, and Sri City in Andhra Pradesh.

 

Singhania expects the industry to sell close to 18 million AC sets this year, up from almost 14 million last year.

 

According to industry estimates, the country produces around six million compressors annually, which is significantly short of the estimated requirement of 10 million units. 

 

Meanwhile, approximately 35 per cent of AC components are sourced from China. BIS approvals for three Chinese suppliers, including the Wanbao Group (refrigerator compressors), Anhui Meizhi Compressor Company, and Highly Group's Shanghai plant are lapsing within the next four months.

 

Additionally, “the inability to meet the demand for plain copper tubes will have a cascading effect on the prices of air conditioners and other cooling units. The AC manufacturing industry is facing an approximate loss of ₹28,000 crore,” an industry source told Business Standard on the condition of anonymity.

 

“To mitigate these issues, it becomes imperative for the government to extend the QCO compliance deadline for plain copper tubes by a year. This will provide domestic manufacturers the time to ramp up their production capacities and ensure a steady supply of high-quality copper tubes,” the source added.

 

Retailers, however, are hopeful of a strong season.

 

“Last season was a bumper year with a growth of 35-40 per cent. This season, we are expecting single-digit growth on a high base for ACs. For refrigerators and room coolers, too, we are anticipating a 10 per cent growth in sales,” said Nilesh Gupta, MD, Vijay Sales. 

Costly affair

 

> Haier and Bluestar have raised their production capacities to meet the 25-30% rise in demand

> Bluestar hiked prices by 3% in February, while Haier is evaluating a 4-5% hike in prices

> In March, Haier saw more than 50% growth in sales and installation of ACs, which is expected to grow further

> Industry insiders said, for consumers, AC prices are expected to rise by ₹1,500- 2,000