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Indian air-conditioning manufacturers are resorting to airlifting essential components like compressors, cross-flow fans, motors, and PCB circuits to meet the soaring demand triggered by a relentless heatwave. The spike in AC sales has reached record levels, prompting companies to source components urgently from global suppliers across China, Taiwan, Thailand, Malaysia, and Japan, industry insiders revealed.
The emergency airlifting has become necessary as traditional ocean freight delivery methods are too slow to keep up with the current demand surge. This unprecedented demand has also led to a price hike of 4-5% for air conditioners, driven by the increased costs of metals like copper and aluminum, which are critical for AC manufacturing.
Soaring Demand and Supply Chain Strain
The room air-conditioning industry has experienced approximately 50% growth over the past three months, far exceeding expectations. Daikin Airconditioning India Chairman and Managing Director, Kanwaljeet Jawa, noted that some companies faced component shortages and resorted to airlifting. “The industry is in a very buoyant mood,” Jawa said, emphasizing the industry’s rapid growth.
The industry’s component supply chain in India is still developing under the PLI (Production-Linked Incentive) scheme, leaving manufacturers dependent on imports for about 60-65% of product value. Blue Star Managing Director B Thiagarajan highlighted the unanticipated demand surge, saying, “The industry was prepared for up to 25-30% growth, but no one had planned for a 70-80% rise in demand.”
Thiagarajan further explained that the growth rates in recent months have been staggering, with March seeing a 40% increase, April 80%, and May 70%. “June is expected to see another 70% growth,” he added. This surge has necessitated airlifting components to avoid sales losses.
Component Shortages and Price Hikes
Typically, companies plan inventory for three months of advance production, shipping components via ocean freight. However, the sudden demand spike has led to emergency airlifts. The industry imports compressors, PCBs, fan motors, copper, and aluminum from markets like Taiwan, China, Thailand, and Malaysia.
Jawa stated that Daikin had anticipated some of these challenges, setting up its own manufacturing facility in Sri City and partnering with Japanese motor manufacturer NIDEC Corp. However, Daikin still faced issues with PCB shortages, necessitating airlifts from Japan.
Price Adjustments Amid Rising Costs
With metal prices on the rise, AC prices are expected to increase by 2-3%. Godrej Appliance Business Head & Executive Vice President Kamal Nandi pointed out a 20% increase in copper and aluminum prices. “We managed to retain prices in Q1 due to pre-ordered raw materials, but Q2 production will see higher prices, leading to a price hike,” Nandi explained.
Thiagarajan added that the room AC industry typically plans for summer demand in November, building stock accordingly. Given that stock meant for a year has been sold out in the last three months, coupled with high material sourcing costs, a price increase is inevitable.
