A-C majors chill out as unbranded peers wind up

Duty cuts pare price difference over known brands

Beaten out of the fray by branded players, unorganised air-conditioner manufacturers are re-inventing themselves in the aftermarket with supplementary and complementary services for branded products.

Vipin Sondhi, managing director of Tecumseh Products India, a 100 per cent subsidiary of the $2 billion US compressors maker, said: "The manufacturers of unorganised air conditioners have become service network dealers of major branded players. This has been triggered by market stagnation faced by these players."

Voltas' air-conditioner division is exploring opportunities of roping in unorganised air conditioner manufacturers in a big way.

P A Nair, assistant general manager, south zone, cooling appliances business division, Voltas Ltd, said: "The company was already making use of unbranded players for servicing air conditioners. There are a large number of unorganised air conditioner manufacturers in the country which we want to tap in a big way. This is beneficial for both the parties."

For the branded manufacturers, utilising the skills available with unorganised air conditioner makers works to ensure quicker response to customer complaints.

The reduction in excise duty for air-conditioners has resulted in the narrowing of price difference between the air conditioners manufactured by the organised and unorganised players.

Industry experts feel customers opt for branded air-conditioners over non branded ones as the price difference is just between Rs 1,500 and Rs 2,000. This the customer is willing to pay as he gets warranty and product support.

The excise duty has been gradually coming down over the years but in Budget 2003, the excise duty on air-conditioners was reduced from 32 per cent (including 16 per cent special excise duty) to 24 per cent.

The manufacturing cost of organised air-conditioner manufacturers has also been brought down by sourcing components from Thailand and Korea.

Srinivasa, director, Viveks Ltd, one the largest retail chains for consumer durables, said organised players are leveraging the competent skill and knowledge of air-conditioner manufacturing available with the unorganised players by roping them in as their dealers or franchisees.

He pointed out using the skills of unorganised manufacturers is very cost effective and also reduces the administration cost of the branded players as against the investment required in setting up their own dealership network.

It is estimated that there are about 7,500 dealers of consumer durables across the country.