World Environment News

FEATURE - Steamy India discovers joys of air conditioning

Date: 17-Oct-02
Country: INDIA
Author: Shailendra Bhatnaga

Sales have been bumper this year and firms expect them to get better in a country where the summer mercury routinely rises above the 45 degree Celsius (113 degrees Fahrenheit) mark.

"The best attribute of an AC (air conditioner) is its addiction," said Salil Kapoor, sales and marketing product group head of the Indian unit of South Korea's home appliances firm LG Electronics, the world's largest AC maker.

"It's a romance," he told Reuters in an interview.

Air conditioner companies see India as a potential gold mine as it offers a winning combination of rising disposable incomes and AC ownership levels of just 1.1 percent of households.

And average prices for airconditioners in India have dropped by about 20 percent over the past two years thanks to new companies entering the fray, making them more accessible to consumers.

LG expects industry sales to rocket by over 20 percent annually over the next three years.

It is one of a dozen odd domestic and foreign brands slugging it out for a slice of the 14-billion-rupee ($290 million) hugely competitive window and split air-conditioner market in India, where the greatest demand is in big cities.

"India is perceived as a highly sought-after market for global air conditioning companies because of its low penetration levels," said LG's Kapoor. LG has a 31-percent chunk of the domestic 700,000-unit a year sector.


A vast majority of middle-class Indian homes have traditionally battled the summer heat with the help of fans or giant fan-driven water coolers which blast cool air.

"All these years we've thought of an AC as an expensive luxury product but that's no longer longer true," said Ravinder Zutshi, vice-president sales at Samsung India.

"(The AC) has moved from its luxury status to a necessity item just like any washing machine or refrigerator," he said.

With average incomes rising, Kapoor expects AC penetration to follow the same trajectory as colour TV ownership which is pegged at 18 percent of all households and whose sales have also been spurred by falling prices.

Indians bought 6.2 million colour TVs in the year to March 2002 and sales could leap 30 to 35 percent this year, industry estimates say.

The Indian middle-class, estimated at between 40-70 million people, is the main target for air conditioner companies.


Kapoor even sees a silver lining to pollution for AC firms.

"In five years I see AC sales competing with colour TVs as temperatures are going to be a lot worse as pollution in India is on the rise," Kapoor said.

AC sales grew 8.0 percent in 2001 and would have risen more but early rains cooled temperatures and chilled demand.

LG's sales target of 130,000 ACs for 2002 has already been surpassed and it now has raised its sights to 180,000 units.

Samsung said it was targetting sales of 65,000 units in 2002 and had already sold close to 57,000 to end-September. Other big players are Carrier Aircon, Amtrex Hitachi and Japan's Matsushita group's National brand.

S.N. Tripathi, executive director at Voltas Ltd, a company belonging to the Tatas, India's second-largest business group, said AC sales more than doubled to over 45,000 units during April, May and June due to late monsoon rains and falling prices.

The June-September rains bring respite from the heat.

"The summer was severe this time due to the lack of rains," Tripathi said. "Sales also rose due to a fall in prices which are now below 20,000 Indian rupees ($414.10) for a 1.5-tonne AC."

The dismal supply of power where outages, lasting hours, are a part of life in large swathes of India, could still throw a spanner into the bullish hopes of AC companies.

"The big problem is the quality of power supply and the cost of running an AC," Tripathi said. Running costs are upwards of three rupees an hour depending upon electricity tariffs.

Also hurting growth is the unofficial "grey" market that accounts for cl

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