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Appliances makers hope to make up for two lost summers

Demand for summer appliances is expected to rebound after two washout pandemic-hit seasons.

Sales of air conditioners, refrigerators, air coolers, and fans are expected to rise at least 20% over the pre-pandemic levels as India is experiencing a hotter-than-usual summer every year, industry executives BloombergQuint spoke with said.

“Along with the rising heat wave, hybrid school and work from home culture is going to push up demand for ACs and other cooling products,” said Gurmeet Singh, chairman and managing director at Johnson Controls-Hitachi Air Conditioning India Ltd. “After suppressed sales in the past two years, we expect the pent-up demand for air conditioners to convert into larger numbers this year,” Singh said in an emailed response to BloombergQuint.

A rebound will reverse the dismal performance of makers of cooling products after the pandemic stalled business. In 2020 and 2021, the industry’s sales fell to near-zero in the peak summer months of April and May because of restrictions to contain the first and second waves of Covid-19.

Jobs cuts during the pandemic also hurt discretionary spending. Consumer durables output fell 2.7% in December—the latest available data—against a decline of 5.4% in the preceding month.

Dealers Stock Up
The companies have gone back to peak production capacity as dealers started to stock up since January-end, anticipating bullish summer months.

The summer sales of cooling appliances in 2021 was better than 2020 yet the business hasn’t reached pre-Covid levels, according to Kamal Nandi, business head and executive vice-president at Godrej Appliances Ltd. He expects the summer sales to grow at twice the pace of last year, surpassing 2019 levels.

With the third wave of the pandemic now practically over, consumers are confident to venture out of their homes for making purchases and are looking for appliance upgrades, he said.

Blue Star Ltd., which gets 40% of annual sales from April, May and June, is expecting a 20% growth over 2019 levels. “The entry-level ACs are in high demand and we are planning to launch 20 such models in this segment over the next three weeks,” its Managing Director B Thiagarajan said.

Inflation: A Dampener
Inflation, however, remains a concern as appliance makers increased prices over the last 8-9 months. And there is no respite. Cost of key raw materials may continue escalating if the ongoing Russia-Ukraine crisis worsens.

“The only concern is inflationary trends could put pressure on disposable incomes…and that is what we will continue to watch closely,” Saurabh Baishakhia, president (appliances) at Usha International Ltd., told BloombergQuint.

On the supply side, there is no significant disruption as of now, according to him. “But, if the standoff between Russia and Ukraine escalates, it could lead to a recession that will impact demand.”

The impact of Russia-Ukraine tensions will not be felt immediately but after 2-3 months, as the industry has already stocked up on raw materials till March, according to Godrej’s Nandi. The extent of price hike will depend on how the situation pans out and how costs escalate, he said.

“Commodity prices have gone up 25-30% against 15-16% price hike the industry has taken across products,” said Atul Jain, executive vice president at Orient Electric.

Costlier fuel and disrupted supply-chain logistics contributed to inflationary pressures.

Orient Electric is likely to increase prices by 5-7% in March to bridge the inflation gap between commodity cost and prices of end products, Jain said.

Most other companies are likely to follow suit but haven’t discussed any timeline. BloombergQuint

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