AC makers set for 25-30% growth over pre-COVID times as India swelters in extreme heatwave

AC manufacturers such as Havells India, Voltas and Godrej Appliances have reported record sales in recent months. Havells, for instance, sold 250,000 units in April, its highest-ever in a month.
Air conditioner manufacturers are set for a bumper season after two years and have reported record sales in March and April as large parts of India swelter in an extreme heatwave.

Higher sales come even as AC makers battle supply-chain constraints because of lockdowns in China, a supplier of several key components to the industry.

“We have seen an unprecedented summer this year. The kind of heat we would typically see in April, we witnessed in March this year,” said Eric Braganza, president of the Consumer Electronics and Appliances Manufacturers Association (CEAMA).

“As a result, we have seen a big boost in AC sales. And sales in January-June this year will be a big jump over the last year,” Braganza added.

The industry recorded sales of 1.75 million units in April, double the sales in the same month last year, said CEAMA.

According to Braganza, the industry is set to witness 50-60 percent growth over last year and an increase of about 25-30 percent over the pre-COVID period.

“We had lost the last peak seasons because of the COVID-19 pandemic but we don’t expect any disruptions this time around,” he added.

Warmest April in 122 years
Several parts of India have wilted in extreme temperatures, with last month being the warmest April on record in 122 years. The India Meteorological Department has warned of more such spells during the rest of the summer.

AC manufacturers such as Havells India, Voltas and Godrej Appliances have reported record sales in recent months. Havells, for instance, sold 250,000 units in April, its highest-ever in a month.

“There is a lot of pent-up demand because of COVID-related mobility restrictions not only from consumers but even on the B2B (business-to-business) side as schools and offices were not open for the last seasons but are resuming operations now,” said Alok Tickoo, executive vice president of Havells-owned Lloyd.

Likewise, Voltas has recorded high sales this season. According to a Voltas spokesperson, sales have grown and almost touched the same volume as in April 2019, which recorded the hottest summer of the decade.

Component shortages bite
The industry is at the same time grappling with a shortage in the supply of several key components such as semiconductors, controllers and compressors due to COVID-related lockdowns in China.

“Given the component ecosystem’s dependence on China, the supply chain is under pressure. We are witnessing a short supply scenario in some components, and the situation could worsen if the lockdown continues into June. It could take a quarter or more for the situation to normalize once China lifts its lockdown restrictions,” said Kamal Nandi, business head and executive vice president at Godrej Appliances, a part of Godrej & Boyce.

Godrej Appliances has reported a 20 percent jump in sales this year so far compared to 2019.

The shortage of components has impacted the supply of energy-efficient air conditioners or the ‘Five Star’ category because there is an acute shortage of controllers and compressors needed for these models.

According to Braganza, the shortage of these components had led to a fall in production as manufacturers are unable to find alternative sourcing options in the short term.

Price increases
The shortage of products and supply-chain constraints have also led to price hikes. Manufacturers across the segment have raised prices by around 10-12 percent since January as they battle inflationary pressures, according to CEAMA.

Price hikes and the absence of a few models from the stores, however, has not deterred consumers from buying ACs, report retailers such as Vijay Sales.

“A few models by certain brands are in shortage but given the heat, consumers do not care about models and are open to buying alternatives,” said Nilesh Gupta, director of Vijay Sales.

The consumer is not too fazed by the price rise either. “About 70 percent of consumers buying through us anyway avail of the EMI (equated monthly instalment) option so the price rise does not matter much to them,” Gupta added.

Going ahead, industry stakeholders are expecting high sales in June but are also watchful of the China situation and hoping that lockdowns in the country will be lifted soon. Monrycontrol