ACs to cost more in April as input costs increase: Blue Star

Air conditioning equipment manufacturer Blue Star Ltd says air conditioner prices are expected to go up by 5 per cent as the cost of raw materials such as steel and copper have increased.

The price hike would come into play in April and could dampen sales for players across the market.

"The two most important components in the air conditioner are steel and copper. Their prices fell in 2015 but post that there has been a significant increase. Whenever there is a price increase, sales drop. People will now prefer lower star models to higher star ones. Sales will also depend on the intensity of the summer," said C P Mukundan Menon, executive vice president, air conditioning and refrigeration product sales group, Blue Star.

The 5 per cent increase would essentially mean cost going up by an average of Rs 1,500 for each model. The company said that the northern part of India will mostly have to bear the brunt of the increased rate as the summer season peaks in May.

"In South India, the summer starts early, so by April, people here would have already bought air conditioners. But April is when they buy in in Northern India and they will have to pay the increased rates," added Menon.

The air conditioning equipment industry in India is estimated to be around Rs 11,000 crore out of which Rs 2,000 crore is air coolers. Post the introduction of GST, the cooler business is expected to increase mainly due to unorganised players coming into a formal system.

Last year due to the extreme summer the growth rate for the industry was 20 to 25 per cent. This was significantly high, generally the industry grows at 10 to 15 per cent every year. This year, the air conditioners sales expect to see a growth of 10 to 15 per cent mainly due to increased price and also the fact that people are more prepared after last year summer. Around 25 per cent of the sales each year is contributed by replacement or upgradation of air conditioner.

"Blue star has seen a growth of 30 to 35 per cent this year. Every year we are generally 5-10 per cent higher than the market growth. We have however now have a huge market share and hence this year our growth won't be that high. This year it will be five per cent more than the market average, because the growth will slowly stabilise," added Menon.

The company currently has a market share of 11.5 per cent and hopes to make it 15 per cent by the next year. The company has also launched smart air conditioner that are connected with wifi and can be controlled using a phone remotely. The company on Wednesday also launched their new model Inverter that can reduce power consumption by 50 to 60 per cent and can set temperature in decimals as well.

In 2018 the company believe that inverter model will be much sought after.

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