While the air conditioner industry is betting on good consumer demand this summer, with a considerable growth in the number of sales, air conditioners have and are becoming more expensive than before for various reasons. Hitachi took a 3-4% price hike in April and expects “another 2-3% increase should the Cost Up onslaught continue.” It’s definitely been a bittersweet summer this year for both sides – air conditioning companies who are only cautiously optimistic and consumers eager to buy new air conditioners but hurt by ever-rising prices. Gurmeet Singh, President and Managing Director, Johnson Controls-Hitachi Air Conditioning India Ltd speak with Tanya Krishna from FinancialExpress.com, around the series of price increases, consumer demand in the segment, among others. Here are excerpts from the interview.
What kind of price increase do we see in your AC range this summer?
The way things are going on the commodities front and on other fronts, we need to raise prices another 3-4% by April. For example, a 3-star Split Inverter Air Conditioner was retailing at Rs 33.5K until last year. Now, it has reached Rs 36.5K to Rs 37K. The promotions, which were on offer, as well as the ACs until last year, have also been taken to a much lower level this year. This is directly related to the affordability of manufacturers this year.
Tell us about the series of price increases in the segment during 2021 and through March 2022.
Gradually, until April, prices will increase by at least 8 to 10%. Prices have increased by almost 6 to 7% between last December and this year. The Cost Up onslaught continues and now that anti-dumping duties are being imposed on aluminum and refrigerants, we are seeing another 2-3% increase. This will be in addition to the actual commodity increase on these items and is inevitable. We rationalize the price as much as possible on our side.
What are the factors leading to a further rise in the price of the range of air conditioners in your company?
Rising input costs – raw material prices, taxes, and transportation rates are pushing brands to raise air conditioner prices. The current global scenario due to the Russian-Ukrainian conflict, shortage of components, global supply chain disruptions, commodity price inflation and the impact of rising fuel prices will certainly drive up the costs of anything that affects consumers in general.
What type of sales growth do you foresee this summer season (of the AC range)?
Due to various market dynamics, we are quite optimistic about the demand for air conditioners this season. We are targeting over 20% growth in FY22-23 (of 2019) in the Indian market. The company is optimistic about achieving record sales of around Rs 1,500 crore during the peak season. We are able to meet the growing demand from established and emerging markets. In the room air conditioner segment, we expect a considerable share of sales to come from smart air conditioners and inverter air conditioners.
With the industry betting on good summer sales this year, will this price hike have an impact on sales?
There is huge pent-up demand for CA this year with the start of the first summers and the transition from the pandemic situation to normality after a long period of restriction. Factors such as the government’s emphasis on domestic manufacturing, the introduction of PLI programs, and growing consumer sentiments towards air conditioners due to education and home working are also driving the unprecedented growth in the industry. Additionally, pent-up demand could lead to a shortage of air conditioners this season, putting manufacturers under extreme pressure to meet herculean consumer demand for air conditioning and cooling products. Today’s consumers see if they are getting quality that justifies the price they pay.
Does Hitachi have a good inventory to meet all the demand for the summer season?
We anticipated the demand for the season and prepared our capacity to meet the Herculean demand. It is true that brands will have to stretch to meet demand this season and in some areas there could be shortages or delays. But if brands prepare their channels adequately, the situation can be handled well.