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Dawn of the Age of Inverter AC

In India, electric fans and desert coolers have been a major source of cooling from the last so many decades, but various factors including growing disposable income, rising temperatures, cheap financing, lower running costs for ACs, growth of the Indian residential and commercial construction market, increasing office and retail spaces along with a boom in the hospitality industry, have pushed people to move towards air conditioners.

Market growth
The AC market has been growing faster than other sectors, at CAGR of 18–20 percent over the last decade. High summer temperatures in the North and high humidity levels in the West and South are driving this growth, along with rapid increase in disposable incomes. The penetration of room ACs in Indian households is just 4–5 percent, implying that there is significant scope for growth. The negative factors are power shortage and poor quality of power. After three years of flat performance, the industry saw a 15 percent growth during 2018.

In the short term, the proliferation in new real estate spaces, both residential and commercial, is expected to gain pace and drive sales. Early summer months in 2018 have also been mild, especially in the North that comprises over 38–40 percent of the all India market.

However, other regions, especially South (comprising about 30 percent of the market), have seen good sales early in the peak selling season. The market is expected to grow by 9–10 percent in 2019.

Market size
The Indian air-conditioning market has changed rapidly over time with respect to technology and innovation in the field of coolers, filters, compressors, and sensors, which are used in smart air conditioners (ACs). These technologies help in developing energy-efficient ACs, which expand the customer base.

The air conditioner market in India is highly competitive and fragmented, with presence of domestic, international, and unorganized market participants. In India, the Northern region has captured major share in the overall air conditioner market followed by the Southern and Western regions.

Consumer preferences
Consumers have developed a preference for energy-efficient models – 5-Star and inverter ACs. The fastest-growing market segment is inverter AC. It can be projected that inverter ACs will account for 50 percent of industry volumes by FY20. AKAI’s range of ACs with inverter technology that ensures greater durability even at high temperature and overload conditions, Gold Fin, 100 percent copper, green gas has conformed to government’s guidelines on energy efficiency.

Window ACs, which accounted for about 80 percent of the total sales a decade back, have gradually slid to 20 percent and are holding on to this share for the last couple of years. Customers with existing window ACs find it easier to replace their units with window ACs than with other types. They are also easier to install. The split AC market is expected to transition to inverter technology over next few years, with inverter ACs projected to account for 30 percent of the market by FY18 and 50 percent by 2020.

Moreover, increasing awareness regarding inverter technology is propelling consumers as well as manufacturers to shift from standard split air conditioners to inverter ACs. Going forward, consumers will majorly prefer energy-efficient air conditioners due to rising energy prices in the country.

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