Despite facing a slowdown in air conditioner (AC) sales last year, consumer durables companies in the country such as LG, Samsung, Godrej and Voltas are all set to introduce a wider range of AC models this year.
Energy-efficient models with Star rating, better features and design, pricing at par with last year and thrust on tier-II and -III cities are some of the strategies they will adopt to boost sales this year. In order to be rated Star, the product must meet stringent energy-efficiency guidelines.
“Unlike last year, which was about entering the Star-rated category, 2009 will be about offering higher Star-rated energy-efficient products and volumes will be driven by the split AC segment with companies adding fresh capacities,” notes an expert on consumer durables.
In 2008, air conditioner sales were especially affected in North India, which accounts close to 40 per cent of the total sales in the country. The branded AC market stood at 2 million units last year and was pegged at around Rs 4,000 crore. Unlike the expected growth of 25-30 per cent, the category only grew by around 10-12 per cent. Industry observers say that going by the anticipated growth, manufacturers had increased the production, which resulted in supply exceeding the demand and putting more pressure on their margins.
This year, however, companies are aiming to better manage their inventories and go easy on manufacturing. Being stocked heavy with inventories, AC dealers are hoping for better deals this year from manufacturers who think otherwise. “Like most of the other companies, we too will not grant extended credit period to the trade channel,” says Pranay Dhabahi, COO, Haier adding: “The trade has the option to buy smaller stocks.”
According to George Menezes, COO of Godrej Appliances, “Star-rating has led to a certain standardisation of products. Hence, differentiation among products will now be on the basis of how much the model can cut down your electricity bill given the economic situation.”
Korean chaebol LG Electronics feels that the growth this year will come from the non-metro markets. “The tier-I cities have become saturated and the focus will be tap the tier-II and -III cities, where the penetration levels are still low,” Ajay Bajaj, business group head (air conditioner division), LG Electronics, said. The company hopes that its extensive dealer network will help maximise penetration into newer markets. LG is also betting big on the upcoming ICC World Twenty20 to add momentum to AC sales as well.
