Air Conditioning Industry in India

Presented by:Pallavi J. Bhojak

Rahul Hirvey

History

In 1902 the first modern electrical air conditioning was invented by William Carrier in Syracuse, New York

In 1820 British Scientist Michael Faradey discovered that compressing and liquefying ammonia could chill air

Carrier Corporation was the major producer in initial states of modern air conditioners

Air Conditioners - Product tree

Air Conditioning

Products

Non-Ducted products

Windows ACs Cassette ACs Mini-Splits

Ducted products

Central Plants Packaged ACs Ducted splits

Key players and their market share in both segments

• LG India• Samsung India ACs• Voltas AC India• Godrej• Bluestar India ACs• Carrier ACs• Onida AC• Hitachi AC• Kenstar• Whirlpool

Market share in all segments

Sales

CarrierLG IndiaSamsungBluestarVoltasOnidaOthersKenstar

THE INDIAN AIR-CONDITIONING INDUSTRY IS A Rs 2,790 CRORE MARKET

Source: Francis Kanoi; Industry estimates

Segment Value Volume Applications

1 Window ACs Rs 1200 crore

540k nos Homes, Shops

2 Mini Split ACs

Rs 730 crore

220k nos Homes, offices, shops, showrooms

3 Ducted Split and Packaged AC

Rs 400 crore

216k tons Commercial establishments

4 Chillers and Central Plant

Rs 460 crore

272k tons Industrial, institutional and large commercial

Rs 2,790 crore

Industry investment in line with potential resulting in surplus capacity leading to oversupply and price wars

Competitive rivalry-Number of well established players; -Good technology capability and technology-Many untapped potential markets

Threat of new entrants-Most current players are global players-New entrants will need to invest in brand, technology, distribution

Buyer power-Multitude of brands across price points – wide variety of choice for customers

Threat of substitute-Unbranded products and cheaper imports could enter the market

Supplier powerIndigenous supply base limited – most raw material are imported

Porters Five Force model

Key Success factors

• Taxation Structure: Reduced excise duty levied helped organised sector

compete with unorganised sector. In 2000, rate increased from 30% to 32%, MRP based

system saved the fate of AC industry.• Shift of demand; market conditions influence corporate

segment demand, changing life style and climate, made demand from household segment balance the ratio.

• Climatic conditions: increased consumer need for ACs overall.

• Non- ducted ACs : Demand for mini-splits have increased due to lower base in comparison to window ACs

• Prices of ACs have reduced due to heavy competition, as this industry got the attention.

With vast Marketing and Advertisement investments for building both product and brand, market expansion was inevitable.

• Competition: as with other consumer durables, in initial intensity of competition, more cash invested by existing and new players leading to drop in prices, fuelling demand.

• Latent demand: long term from Indian households led to MNC making beeline to set up base in India.

Key drivers

• ACs come under the category of HVAC equipments

• Construction• Spread of automotive sector• Per capita income and market fluctuations

Cooling - changing with time..• Nearly 60% of the demand for AC came from

corporate from 2000• Gradual rise of household demand from 2001-

study by Confederation of Indian Industry• Demand for non-ducted products- from both

household and corporate; ducted products- mainly from corporate.

• 2009 Dec, the share from residential segment was 16% , from corporate sector 49%, from automobile industry 19% & remaining from institutions.

THANK YOU.