The summer season in India is something the market looks at with eager eyes. The sun shines bright and the sales is up! Refrigerator, fans, coolers and air conditioners are among a few items which witness huge sales during summer
Summer is just around the corner for the people of India. While South India has already began to experience a raise in the humidity, the North India still enjoys the winter climate. The rise in temperature will be felt usually by April end in North India. The summer season is undoubtedly which gives a huge relief to the market everywhere in India. The market which had been literally froze down wakes up to the fresh stocks and sales. It is said that the weather influences product sales. While it might not be highly visible, there is definitely a connection between weather and a person’s behaviour. An invisible link between the weather and a person’s mood is something proven by the researchers. Considering the consumers who are also individuals, it can be said that the sales is also affected by the weather.
The summer season in India contributes to a huge rise in sales of several items like paints, automobiles, farming instruments, ice cream, beverage makers,sports accessories, clothes, hats, sunglasses, refrigerator,fans, coolers, air conditioners etc. Among the services sector, the summer brings cheer to tours and travels sector as most Indians will travel to hill stations to get a relief from the humid climate.
Indian market of fans and air coolers
Coming to the fan market in India, it consists of ceiling fans, table fans, pedestal fans, wall fans and exhaust fans and is worth Rs.6,500-crore. The market is estimated at 2.5 million fans per month and it is growing at about 10% per annum. India has large number of manufacturing plants located across the country and producing world class fans. The distribution of fans in India is also well developed with over 1,00,000 selling points for fans,across the country. India exports around 5% of fans produced, mainly to African, South-East Asian and West Asian countries. The leading companies in Fan Industry in India are Crompton, Orient, Usha, Bajaj, Khaitan, Anchor, Havells, Luminous, Metro Ortem and Vardhman.It is estimated that India’s AC sales will rise to 7.2m units by FY20 (Financial Year 2020) from 4.7m units in FY17, implying a 15% CAGR
The South Korean multinational electronics company LG is planning to launch products based on consumer insights. “ We looked at the ceiling fans segment and felt while there are products available in the category, the quality is not good. So in June 18, we will launch three models of ceiling fans. These will be premium products and one of the models will have IoT (Internet of Things) functionalities. We will focus on creating a differentiator from the products available in the market, and our products will be much easy to use, clean and maintain,” said Ki Wan Kim, Managing Director, LG Electronics India recently in an interview with The Hindu. India will be the first country where they will launch these ceiling fans, and these have been designed specifically for the Indian market.
Meanwhile Exhale Innovations Worldwide Pvt Ltd recently launched bladeless ceiling fans as part of its joint venture with Exhale Fans LLC USA. With a factory set up in Sriperumbudur near Chennai, Exhale expects to produce these bladeless fans with dimmable LED lights for commercial and residential use. Exhale expects to sell 32% of its produced fans for commercial use in India, another 18% for residential and keep the lion’s share (50%) of it for export. The fans will be available in white and black. The company is also looking at mixing colours like blue, beige depending on demand. Even though the products are not customisable for individual requirement, for bulk orders the company will do so.
Air coolers has also got a great level of acceptance in India. The Indian air cooler market size is estimated to be around Rs.3,000 crore and around 30% of this is based on the organised sector and the rest is catered by the unorganised segment. The Indian air coolers market is forecast to grow at a CAGR of 27% by 2022. Symphony Limited, Bajaj Electricals Ltd., Crompton Greaves, Orient Electric Ltd., Usha International Ltd., Maharaja White Lines, Khaitan Electrical Ltd., Ram Coolers,Kenstar, McCoy India, etc. are some of the major players in Indian market.
The advantages like limited power consumption and cost-effectiveness attract customers to air coolers. Even though they consume more energy than a ceiling fan, it is just a meagre volume considering the power consumption of air conditioners. The air coolers range starts from Rs.5,000 to Rs.14,000 for branded products. The latest innovations in air cooler industry is the wall mounted air coolers. Like air conditioners, some of air coolers have ‘Humidity Control’ features enabled to it.
The fascinating world of air conditioners
With climate changes and global warming becoming a reality, air conditioners has become a necessity than something of a luxury in India. It is estimated that India’s AC sales will rise to 7.2m units by FY20 (Financial Year 2020) from 4.7m units in FY17, implying a 15% CAGR. In the global level, AC penetration level of India is not so high. But a change is definitely felt in the industry with sales gaining strength. The big players in the AC segment has began to market their product throughout the year rather than engaging in marketing only during summer. Accept it or not, ACs are slowly becoming year-long products with sales following yearly trend in India. Companies has launched all weather proposition in the AC segment.
Like earlier mentioned, the weather plays a major role in the sales of AC in India. The wrath of humidity is felt in almost all Indian states at least for some period during summers. Read along with it that 2016 was the warmest year on record globally. 2017 also saw increasing temperature though not as bad as the previous year. In the past, one ton AC was enough for 140 sq ft room. But the current temperature makes it only for 100 sq ft room (ideally for 10 ft height room and 2 couple).
To save Air Conditioner Technicians and service personnel from exploitation, a Society has been formed based in Kollam, Kerala. Heating Ventilation Air Condition Perfect Relations State Employees Union (HVACRSEU) is a society for workers and dealers involved in Air Conditioners sales and service. Society provides all kinds of ACs available in Kerala market along with its spares and service. Society will soon have offices at Alappuzha and Kozhikode districts. Secretary of the society is Dinesh Chandran who hails from Kozhikode and President is Sreekumar while Ayoob P A is the Treasurer. The society which has around 2000 members is also indulged in charity and welfare activities of its members along with providing benefits like ESI and PF.
The society is also into sales and service of all leading AC brands through its outlet Aircon Plaza located at Kollam. All kinds of corporate work related to hotels and offices are undertaken by them.
The leading players in the room AC market in India are Voltas, LG, Lloyd Electric, Blue Star, Daikin, Hitachi and Samsung. There are also the famous global brands like O General, Mitsubishi Electric, Carrier, Toshiba, Panasonic and the Indian brands like Videocon, Micromax and economical brands like Electrolux and Haier.
Moving up with the global trend, in India also the inverter technology ACs are gaining more popularity than the fixed-speed ACs. Even so the high price of spare parts stands hinder in the growth of inverter ACs. The disability of fast cooling is also heard widely against inverter ACs. Many companies have completely turned into split inverters boosting the sales of inverter ACs in India. Split ACs are largely in demand in South India. The trend is also seen among people to turn to ACs rather than air coolers which had a major chunk of sales in the previous years.
When you consider the purchase of AC always look out for a established brand name. The after-sales is also important. It is advisable to purchase the AC from Sales and Service Dealers to ensure hassle free after-sales support. (Normal cleaning of AC in once in a three months and a water service in a year will be healthy for your AC.) Also go for products that are reliable even though they may cost more than the normal ones. The initial investment of say Rs.8,000 or Rs.10,000 will not be a problem in the longer run as cheap quality ACs may require constant service and components change. Most home appliances do not engage in capacity measurement which is very crucial in finding the right AC for your home or room.
How branding helps to stay ahead in AC sales
There is no doubt that brand name and marketing activities help brands to stay ahead of their competitors in the competitive field of AC sales. Voltas which continues to lead in the Indian market is known for their successful ‘Murthy Campaign.’ The campaign which features the smart consumer named ‘Murthy’ had been an instant hit from the past itself. Marketing experts believe that the brand Voltas was successful in striking a chord with consumers through ‘Murthy.’ The factAir conditioners along with refrigerators belong in the highest tax slab in GST (28%) which makes the product again costlier
Consumers might be remembering the brand campaign of another AC manufacturer Blue Star which highlighted ‘Precision Cooling’ effect of their inverter AC range. The highlight was that it allowed setting the temperature in decimals. The campaign shows the expertise of Blue Star in cooling and supports the value proposition of the brand that ‘Nobody cools better.’
There are also brands which stay in the minds of the consumers through its long heritage and uncompromised production values. Mitsubishi is one such brand. “The strength of the brand lies in their production quality. While most AC manufacturers tend to put aluminium products inside the components, Mitsubishi still continues to use 100% copper for parts. Even though expensive than other, it gives more value for money. In my 20 years of experience in AC service sector, Mitsubishi is one brand on which I heard least complaints. If you ask me to suggest a brand, no doubt it will be Mitsubishi,” says Ayoob P A, Managing Director, Meridian Coolings based in Kerala.
Mitsubishi has got two divisions- Mitsubishi Heavy Duty and Mitsubishi Electric. While the former caters to aircrafts, metro trains, the latter falls in the category of home / room ACs. Mitsubishi has also got a brand under the brand name ‘Aux’ aiming at the budget consumers.
Most of the AC manufacturers in India are engaged in outsourcing components from aboard and assembling them in the plants. While compressors of ACs are mostly sourced from China/Thailand, condensers are procured from local vendors. The complete AC is then assembled at the AC manufacturer’s factory. Typical, R&D spends are in the range of 0.2% - 2% of sales. Only a few AC manufacturers are engaged in serious Research and Development. Daikin has been among the front runners in terms of R&D spending and has built its first R&D facility at an investment of Rs.6 billion in Rajasthan. The center is fully operational from July 2016 and would facilitate customisation of ACs for climatic conditions in India and other SAARC countries. It is also worthy to note that most companies typically spend 1-7% of their sales on advertising. With the onset of the summer season, AC manufacturers step up their advertising spends to capture customer mindshare.
The leading brands are also actively engaged in promotional activities and are offering exchange schemes, free installation and discounts. Discounts vary for each brand and most are in the range of 10-15% of MRP. For premium brands like Mitsubishi, Hitachi, O General and Daikin, the discounts are in the range of 8-12%, while in case of Voltas and LG, the discounts are in the 12-15% range. Enhanced warranty is another feature which seems to attract consumers to a brand. Several companies are offering comprehensive 5-year warranty on ACs. In the case of inverter ACs, companies are offering 10-year warranty on the compressor and5-year warranty on the condenser.
With constant innovation, AC manufacturers introduce new varieties in every year to lure customer to their product. Wifi-enabled ACs which allow users to control the machine using a smartphone seems to be the trendsetter now. Most ACs comes up with their own mobile application (App) which can be used to monitor power usage and consumption. In India the consumers tend to be highly cautious about electricity bills and thus increased focus on power saving models of inverter ACs are also seen widely.
ACs enabled with air purifiers as a result of increasing concerns about polluted air within cities, features like automatically cleaning the dust in air filters, ‘Mosquito Away’ technology, ‘Himalayan Cool’ technology for faster cooling, ACs which can be switched on from outside the home using GPS enabled smartphone, ACs with dehumidifiers for controlling humidity, especially during monsoon, so as to offer better comfort, ACs with all-weather usage, ACs with air purifiers and ACs which use eco-friendly R410 green gas refrigerant are some of the trends we had witnessed in 2017.
Talking about the modern innovations in the world of AC, Ayoob says that the changes are fantastic. “No doubt they give us convenience. But the problem with all these is that they all work on minute electric components. They are not manual controls. Air Conditioners will have definitely some moisture which will easily damage those electric components. Often replacing them will be problematic. One way to overcome this is by providing proper classes and updates to technicians. Technical awareness is not something to be treated lightly. All companies must seriously devote time for this,” adds him.
Market to witness high growth
Since June 2015, the Bureau of Energy Efficiency (BEE) has introduced the ISEER ratio for inverter ACs. It is the ratio of total amount of heat that an AC can eliminate to total energy consumed to remove this heat. The minimum ISEER is 4.5 for a 5-star-rated inverter AC and 3.5 for a 3-star-rated inverter AC (equivalent to a 5-starfixed-speed AC). Currently, inverter ACs account for 12-15% of the overall market, while 5-star-rated ACs account for 22%. However, 3-star rated ACs are the largest contributors to the market.
Industry experts believe that the trend will be that inverter ACs account for 30% of industry volumes in FY18E (Estimate) and 50% in FY20E. The room AC industry is shifting toward energyefficient models (i.e. 5-star/inverter ACs) over past few years, as customers are increasingly becoming aware of lifetime costs of ACs vis-à-vis upfront costs.
With a sharp rise in commodity prices, the cost of ACs is likely to increase during the year, subject to INR movement (nearly 50-60% of the parts of a split AC are imported, and manufactures usually offset the impact of currency depreciation by passing on price hikes to end-consumers). The currency demonetisation and introduction of GST last year made AC sales go down for a while. However the market is again gaining momentum. Air conditioners along with refrigerators belong in the highest tax slab in GST (28%) which makes the product again costlier. Even so, the market will grow as the experts believe that air conditioners, fans, coolers etc are fast turning into necessary commodities than luxury items.