Indian AC Industry Set for Fast Growth Amidst Challenges

The Indian air conditioner industry is projected to grow at a 19% CAGR over the next three years, driven by rising temperatures and higher disposable incomes. Despite challenges like compressor shortages and supply chain disruptions, demand for high-value components is expected to rise significantly.

The Indian air conditioner (AC) industry is on track to achieve a robust 19% compound annual growth rate (CAGR) over the next three years, fueled by rising temperatures and increasing disposable incomes. A report by Motilal Oswal indicates that the industry saw a 12% year-on-year growth in FY24, with around 9.4 million units sold. Looking forward, the industry is expected to witness a sharp 35-40% year-on-year increase in FY25.

According to the report, the industry volumes grew by 12% year-on-year in FY24, and a 19% CAGR in industry volume is anticipated over FY24-27. As the AC market expands rapidly, the demand for high-value components, including compressors and copper tubes, is also set to rise.

The report emphasized that nearly 80% of India's annual AC output occurs between December and June, marking a crucial production period. Any disruptions during this time can impact the overall production volumes for Original Equipment Manufacturers (OEMs) and Original Design Manufacturers (ODMs). It noted that with the annual AC demand growing at such a healthy pace, there's a corresponding rise in demand for high-value components like compressors and copper tubes.

However, the industry encountered a significant challenge in the third quarter of FY25 due to a shortage of AC compressors. The report highlighted three primary reasons for this setback. First, the Bureau of Indian Standards (BIS) certification for a major Chinese compressor manufacturer expired, halting shipments to India since October 2024. Second, the rising AC demand in China, guided by government subsidies, has led to supply constraints. Third, potential U.S. tariffs on Chinese exports have prompted supply diversions to the American market. This shortage may have resulted in production losses for some manufacturers. To maintain growth momentum, the industry must address supply chain constraints in the years ahead. (ANI)