Holtop Weekly News #30

The Indian air conditioner industry is seeing all-time high sales this year due to the heat wave that has been sweeping most of the country, but delay in receipt of components from COVID-hit China is causing shortages of premium models. With temperatures touching 49ºC in parts of New Delhi, sales in the country are expected to reach 8.5 million to 9 million units this year, up from 2019’s previous record of 6.5 million, said Eric Braganza, president of the Consumer Electronics and Appliances Manufacturers Association (CEAMA).

“The market has been extremely good because this year, we got the heat in the second half of March rather than April,” he said. Power demand is at a record high as India registered its hottest March in more than a century followed by unusually hot April and May. “Because of the COVID-19 related issues in China, it is taking longer for supplies to reach India. As a result, and with a surge in demand, we’ve seen that energy-efficient air conditioners are in short supply,” said Mr. Braganza. He added that deliveries of parts from China are now taking 60 to 90 days, compared with 45 days normally. Indian companies depend on China for 10 to 20% of air conditioner components like compressors and controllers. The delay in supplies is mainly affecting the production of energy-efficient air conditioners, because lower efficiency products largely use locally made components.

Mr. Braganza said that later this year, the dollar’s appreciation and an increase in raw material costs may force manufacturers to increase prices. The Indian rupee (INR) hit a record low of 77.79 to a U.S. dollar (US$) on May 18. Prices of cooling appliances like air conditioners, refrigerators, and air coolers have increased by 10 to 15% in the past two years due to an increase in commodity and component prices by 30 to 35%. While manufacturers have been absorbing a large share of the input cost increase, industry sources said there will be another round of price hike in the April to June quarter. “There has been a further increase in input cost in the last few weeks and a price hike is inevitable. Companies will do it in the June quarter depending on the demand-supply situation,” said Kamal Nandi, Godrej Appliances business head.

Manufacturers of air conditioners and refrigerators have increased production to full capacity in May from 60 to 70% until April, due to a spurt in demand caused by the heat wave in many parts of the country and pentup demand of the last two summers, which were impacted by the pandemic induced lockdowns. Sales of cooling appliances of manufacturers such as Voltas, Haier, Godrej Appliances, and Lloyd grew by 15 to 20%, surpassing industry expectations and necessitating an increase in production.

Voltas, a part of the Tata group, said it was dependent on imports for only a few components as it has been trying to increase localization over the years. But given the surge in demand, some models could be in short supply. “There has been a spurt in demand after two washed-out summers. We are ramping up our production due to the sudden surge,” said Voltas managing director Pradeep Bakshi. He said while the company is prepared with stocks, several smaller manufacturers have already exhausted their inventory.

Haier India president Satish N. S. said sales are shooting up in northern, western, and central parts of the country due to the heat wave. “Despite the inflation, consumers are buying cooling products using consumer finance since these have become a necessity. If this kind of demand continues for another 30 to 35 days, almost every brand will run out of inventory,” he said.

Blue Star, one of India’s major air conditioner manufacturers, said that it had doubled the inventory of some items like semiconductors to 90 days due to a scramble to block the quantities from vendors.

Rajesh Rathi, sales head at Lloyd, said there is pressure on certain models due to good sales, but companies with their own manufacturing units in the country and supply chain will benefit.

Kamal Nandi said mass segment cooling products, which so far were under stress, have also picked up and demand is likely to be stronger in the marriage season as well. “We will try to run peak production till May, but we fear there will be a shortage in May since it is difficult to further scale up due to supply chain disruptions,” he said.

The India Meteorological Department expects the heat wave is likely to continue over north-western, central, and western India, with maximum temperatures 4 to 8ºC higher than normal in several parts of the country.