AC Prices Surge Amid Supply Chain Woes
MUMBAI: As temperatures rise, so do the prices of air conditioners (ACs) in India. Manufacturers are grappling with a dual challenge: a weakening rupee that has inflated import costs and supply chain disruptions delaying essential components like compressors. Consumers may find themselves paying more for ACs this summer, potentially missing out on their preferred brands.
Currency Fluctuations Impact Costs
The Indian rupee has depreciated over 5% against the dollar in the past year, significantly increasing the costs of both imported and locally sourced raw materials. Kamal Nandi, the business head and executive vice-president of Godrej Enterprises Group, indicated that companies are likely to adjust prices by the end of the month. This rise in input costs is directly affecting the final retail prices of AC units, as noted by Pradeep Bakshi, MD & CEO of Voltas. To mitigate the impact, Voltas is focusing on enhancing its domestic manufacturing capabilities to reduce reliance on imports.
Despite improvements in the local AC manufacturing ecosystem, supported by the government’s Production-Linked Incentive (PLI) scheme, the production of critical components remains insufficient to meet demand. Industry sources estimate that while the demand for AC units stands at approximately 14 million, local compressor production can only support around 8 million units. This gap underscores the ongoing dependency on imports, particularly from China, which still supplies at least 35% of AC components.
Supply Chain Disruptions
Global geopolitical tensions have exacerbated supply chain issues, leading to increased logistics costs and production delays. Vishal Gupta, MD (finance) at PG Electroplast, highlighted that the robust growth in China’s domestic market has diverted shipments away from India, further straining the availability of compressors. Manish Sharma, chairman at Panasonic Life Solutions India & SA, warned that these delays could significantly impact AC production as early as April.
Additionally, some Chinese suppliers are facing challenges in obtaining necessary recertifications from the Bureau of Indian Standards (BIS), compounding the supply issues. B. Thiagarajan, MD at Blue Star, noted that the BIS license of one major Chinese supplier is set to expire in June, which could further complicate the industry’s supply chain.
Consumer Concerns Amidst Rising Prices
Despite the anticipated price increases, experts believe that demand for ACs will remain strong due to the availability of easy financing options like EMIs. However, Nilesh Gupta, director at Vijay Sales, cautioned that consumers might struggle to find their preferred brands or models. The onset of summer is expected to be earlier this year, prompting companies to prepare for a surge in demand. Blue Star projects a 25% growth in sales, driven by the increasing necessity for air conditioning amid rising temperatures and changing weather patterns.
As the industry braces for a challenging season, the combination of rising costs and supply chain disruptions poses significant hurdles for both manufacturers and consumers in the air conditioning market.
Observer Voice is the one stop site for National, International news, Sports, Editorโs Choice, Art/culture contents, Quotes and much more. We also cover historical contents. Historical contents includes World History, Indian History, and what happened today. The website also covers Entertainment across the India and World.
