Air Conditioner Market in India

The AC market in India presents a fragmented scenario with

more than 25 players from all over the world. Voltas, Blue
Star, Godrej, Videocon, Fedders Lloyd and Onida represent
the Indian manufacturers. The Japanese companies include
Daikin, Hitachi, Fujitsu General, Carrier Toshiba, Panasonic,
Mitsubishi Electric, Mitsubishi Heavy Industries and Sharp.
Carrier, Trane and Whirlpool are the American multinationals
in the arena. The Korean chaebols LG and Samsung are
strong players. The Chinese majors Carrier Midea and Haier
are also quite active. Zamil Air Conditioners of the U.A.E.
entered the market two years back. Tecumseh and York
brands are also present in small numbers. Kenstar of
Videocon Group and IFB have announced their intentions to
enter the market.

Market Growth
The AC market has been growing faster than other sectors,
at CAGR of 18-20% 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%, implying that there is
considerable scope for growth. The negative factors are
power shortage and poor quality of power. The last three
years, however, saw muted market performance. The
beginning of the summer during April-May 2014 was mild,
though it picked up later. After three years of fl at
performance, the industry saw a 15% growth during 2014. 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 2015 have also
been mild, especially in the north that comprises over 40%
of the all India market. However, other regions, especially
south (comprising about 20% of the market), have seen
good sales early in the peak selling season. The increase in
excise duty is a negative factor. But most market players
predict 9-10% growth in 2015.
Market Size
The market grew from 3.8 million in 2013 to about 4 million
in 2014. This includes window ACs (6,05,000), high wall splits
(24,45,000), floor mounted units (15,000), cassettes
(80,000), inverter ACs (2,00,000), ductables and packaged
units (90,000 numbers, or 6,30,000 tons), and VRV/VRF
(25,000 outdoor units). Since industry players are averse to
sharing data, and different manufacturers estimate different
industry figures, these numbers are approximate and have
been rounded off . In terms of market share, Voltas has
overtaken LG as the top brand, which has been displaced to
the second position. The next three slots (in alphabetical
order) belong to Daikin, Hitachi and Samsung. They are
followed (in alphabetical order) by Blue Star, Fedders Lloyd,
Fujitsu General, Panasonic, Videocon and the others.

Consumer Preference
Consumers have developed a preference for energy efficient
models 5 Star and Inverter ACs. The fastest growing
market segment is inverter AC, which is growing in 2015 at
about 25% over 2014. It is projected to end the year with a
sale of about 2,50,000. Window ACs, which accounted for
about 80% of the total sales a decade back, have gradually
slid to 20% 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.

Refrigerants
Manufacture of ACs using R22 will not be allowed from
January 2020. The import of air conditioners using R22 has
been banned in accordance with the accelerated phase-out
schedule for developing countries. As far as the choice of
alternate refrigerants is concerned, most Indian
manufacturers are adopting a wait-and-watch policy. Daikin
has gone ahead full swing with R32 for fixed speed as well as
inverter models. Panasonic, Hitachi and Fujitsu General are
likely to follow suit. Blue Star is planning a pilot batch with
R32. Godrej has been manufacturing models using R290. All
the other manufacturers are continuing with R22 for fixed
speed models, and R410A for inverter models.

Energy Labelling
BEEs star labelling norms have become more stringent.
Models rated four-star earlier have become three-star, and
so on. During 2014, there was a shift in consumer preference
from one- and two-star
models to three- and four-star models. BEE is now seriously
considering discarding one- and two-star ratings, and re-
rating three- and four-star as one- and two-star. It has also
mooted bringing inverter ACs into the same table as fixed
speed ACs. It is discussing with Refrigeration and Air-
conditioning Manufacturers Association (RAMA) for voluntary
star rating of inverter ACs, which are not covered, so far, by
the star rating scheme, from January 2016. The voluntary
rating may become mandatory, like all fixed speed models,
from 2017 or 2018.