Cooling market heating up: AC sales in India to hit one crore units mark in coming months

With summer set to peak in the northern parts of the country in the coming days, it is no big surprise that the country’s air-conditioner (AC) market is gearing up for some red-hot sales. However, this year is different. The sale of AC in the country is expected to cross the milestone of one crore units this financial year for the first time.

The wait will be much shorter when it comes to the two crore milestone—as short as four years.

It could, of course, be way higher, if India’s AC makers had their way. Globally, 15 crore ACs are sold every year, with China alone accounting for 8.5 crore of them. Compared to that, one crore does sound puny, but for India’s AC makers, it is a high point after several years of sales that were growing, yet, never really gained escape velocity.

“Penetration of room AC in India is as low as 6 to 7 per cent,” said B.Thiagarajan, managing director of leading AC manufacturer Blue Star, “And 95 per cent of AC buyers are first timers in the country.”

In other words, this meant that most households that could afford an air-conditioner only brought one. For a good part of the previous century, the AC market in the country was minuscule not just because of the cost factor (initial buying cost plus the prohibitive recurring cost of electricity to run it) but also due to erratic power supply, especially during the summer. The economic slowdowns over the past decade or so, as well as whammys like demonetisation and GST implementation also played the part in tiring out the sector just when it seemed the one crore milestone was near.

But that is happening finally. “AC sales will now continue to rise every year. Because weather conditions are getting uncomfortable, second-time buyers are coming in and consumer finance is getting easier,” explained Thiagarajan.

Sky-high electricity bills, once the nightmare of AC owners, is also on the mend. After the government’s Bureau of Energy Efficiency started doing star ratings for consumer appliances, including AC, companies too have focused on improvements. For example, an AC circa 2022 consumes 85 per cent less power than one that came out in 2000.

There is another reason why the sector is gung-ho – the government’s production-linked-incentive for manufacturing. While for AC makers this is linked to sales, that translates to aggressive market play for all the leading brands that have taken it up – meaning you can see aggressive marketing and sales going up in the coming years. The cooling market is sure heating up.