Product Analysis

Air Conditioners

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 Agenda
 Product categorization
 Industry structure – Indian Scenario
 Facts and figures
 Major players
• Market share
• Strategies
 Demand side
 Supply side
 Strategies for growth
 Future prospects

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Product Categorization
 Room air conditioners: (RAC)
• Window air conditioners
• Split air conditioners
 Packaged air conditioners
 Central air conditioners

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Industry Structure (2005-06)
 More of a utility item rather than a luxury item
 A robust 19% growth volume aggregating 1.5 million units
 Significant price reductions over the past 2 years
 Market dynamics: Negligible rural demand
 Key drivers of growth
• GDP/Capita growth
• Reduced indirect taxes
• Import duties

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 The AC Market in India

20.40%
Industrial

42.70% Ducted, Split and

Packaged
Central
11.20%

Room

25.60%

Data pertaining to FY2006

Net Value: Rs 46.79 billion 5
The RAC Market in India

30.20%
Split
Window

69.80%

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Sectorwise RAC Demand
Small pvt sector
10% 15%
5%
Public sector
15%
Govt
20%
Med and large pvt
cos
15% Household
20%
Hospital

Small business

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Regionwise Distribution of RACs

28
22 South

28
West
27
Split
10 Window
East
12

32
North
39

50 40 30 20 10 0
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Share of Organized
Sector in RACs

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Major Players:
Units Sold and Market Share
Company Units Percentage share
LG 500,000 33.3%

Voltas 200,000 13.3%

Samsung 180,000 12.0%

Videocon 130,000 8.7%

Hitachi 100,000 6.7%

Carrier 80,000 5.3%

Others 310,000 20.7%

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Product Portfolio
Comparison

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Major Players #1 : LG
Electronics
 Focus
• Product development
• Aggressive promotion, has been the cornerstone of LG’s
strategy
 Positioning
• Health Air system as a USP
 New Initiative
• Launched a range of commercial ACs targeted at the
corporate segment
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Major Players #2 : Voltas
 Focus
• More on engineering excellence
 Positioning
• As an original equipment manufacturer for global brands
like LG and Electrolux
 New Initiatives
• Launched new models targeted at the consumer segment.
• Entered into a contract manufacturing agreement with Haier
for refrigerators and ACs
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Major Players #3:
Samsung Electronics
 Focus
• To differentiate itself on the basis of product features
 Positioning
• Target the higher-value commercial market segment
 New Initiative
• Recently announced plans to invest US$5 million to
manufacture heat exchange components for ACs

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Major Players: Others
 Videocon International Limited
• Differentiated its products by the launch of `Quadra Heat Exchanger
Technology’, which claims to provide better cooling and economy
 Carrier Aircon Limited
• Commenced distribution of Toshiba ACs
 Hitachi Home and Life Solutions Ltd.
• Expanded product range - launched new models with technology
support from Hitachi, Japan
• Implementing a new branding exercise at select dealer shops and
multiplexes in India, with the objective to enhance brand visibility

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Market Share in 2005-06

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Strategies for Growth
 Facilitate growth in the domestic market
• Position the AC as a productivity enhancer to deepen penetration in offices
• Educating consumer on running cost of AC and ways to reduce it
• Tie-up with contractors, architects to optimally design rooms for least AC
running cost
 Facilitate growth in exports
• Benchmark Indian plants to the best in the world
• Understand best practices in operations and educate Indian players
• Participate in tradeshows, conferences in target markets
 Work with government to shape policies
• Ensure implementation of safety standards
• Ensure national level quality/performance standards
• Define clear procedures/paperwork for imports/exports
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Future Prospects

 Rapid growth
• Affordability
• Higher temperatures
 More value added models
 Higher competition
• Global players
• Removal of restrictions
• Higher R&D

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