Indian Air Conditioning Market Growth, Trends, Analysis and Forecast 2021-2027

Consumer appliances are one of the fastest-growing industries in India. The air conditioning (AC) industry is expected to gain huge growth in the Indian market. Hot climatic conditions and increasing per capita income are some of the key aspects that are contributing to the growth of the AC industry in India. Moreover, the continuous expansion of the global AC market players, such as Mitsubishi and Samsung, is further augmenting the growth of the industry in India. In 2017, Mitsubishi had set up its production services in India. The country is emerging as a chief production center for the SAARC countries. In India, the AC market accounts for nearly 60% of the total electricity load, majorly in summer days, especially in metropolitan cities of India, such as Mumbai and Delhi. Furthermore, the requirement for power plants is continuously growing in the country, intending to meet the growing demand for power, which, in turn, is raising the CO2 emissions in India. All these factors are shifting the attention of the major population towards the deployment of the energy-efficient AC systems, in turn, motivating the growth of the industry in the country.

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The decline in the cost of AC in India is further accelerating the adoption rate of AC in the country. For instance, LG Electronics and Panasonic have planned to decrease their production costs of AC to increase their sales in the country. In 2017, LG Electronics decreased its costs of AC up to 25% to set competition in the global AC market. LG Electronics' cost-cutting strategy is forcing other brands to develop regular AC even more cost-effectively. In India, the cost of LG’s inverter 1.5 tons AC was worth $620 in 2020, which declined from around $710 in 2017. Likewise, the 5-star regular split AC price was estimated to around $600- $710 in 2019-2020. Moreover, the online-exclusive manufacturers and small market players have cut prices further, selling a unit between $490 and $600. This reduction in the cost of AC will augment the purchasing rate in India in the near future. Despite a rise in the penetration of room AC in households, a significant portion of the population will still not be able to afford AC in the next two decades and will continue to rely on natural ventilation and fan-assisted ventilation for thermal comfort in the country.

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Government Initiatives/Support for the AC industry

The Government of India is significantly supporting the growth of the AC industry in the country. Energy Efficiency Services Ltd. (EESL), a joint venture firm formed in 2009 by various power companies, such as Rural Electrification Corp., NTPC Ltd., Power Finance Corp., and POWERGRID. Under this venture, EESL will make a mass procurement of energy-efficient ACs from manufacturers, such as Daikin, Voltas, Blue Star, and Whirlpool. It will offer consumers the zero down payment schemes where one would have to pay only equated monthly installments (EMI) which, the government expects could further encourage the consumers to opt for an energy-efficient AC system. Further, it is also expected to decrease the prices of highly energy-efficient ACs by 30% in the near term. A 1.5-tons, 5-star rated split AC that now costs in the range of $600- $710 is expected to be available for a lower cost in the near future. However, the energy-efficient AC market in India remains steady as the penetration of ACs is still at 5% of the total households in the country, as per Panasonic Corp., a key market player.

There is another mission, named ‘National Mission on Enhancing Energy Efficiency’, under the National Action Plan on Climate Change, approved in 2010. The mission has an Energy Efficiency Financing Platform (EEFP) initiative that catalyzes finances for the development of energy-efficient sectors. Under this initiative, the Bureau of Energy Efficiency (BEE) has signed MoU with HSBC Bank, Tata Capital, PTC India Ltd., SIDBI, IFCI Ltd., to promote finances for energy efficiency projects.
BEE has been creating and implementing policy measures to boost energy efficiency in the country. Market transformation towards energy-efficient products is used as a tool for bringing down costs. Moreover, the Mission Innovation (MI) launched on November 30, 2015, during COP21 in Paris, is a global platform that is expected to foster and promote R&D for accelerated and affordable clean energy innovation. India is a key member of this global initiative and is a member of all seven innovation challenges. Heating and cooling of buildings are one of the priority areas covered under MI.

Codes & Standards: Indian AC Market

There are certain testing standards employed by the country for the manufacturing of the AC systems. ISO 16358 was approved as an ISO standard in 2013; however, some countries such as India have already adopted the standard in their regulations. The various test points needed by ISO 16358 for two-stage, fixed speed, multistage, and inconsistent speed AC are typically based on the ISO 5151 T1 climate condition. This facilitates its wide adoption in the testing field, as additional testing of the appliance is not required.

Apart from these, the shifting of trends towards the centralized AC systems is also creating a wide scope for the market. In India, there is a considerable increase in the trend of centralized AC systems as these systems deliver better efficiency and significantly low-cost system by sharing load capacity throughout the building. It uses high-efficiency water-cooled chillers providing better energy efficiency. Thus, this is likely to create ample opportunities for market growth.

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Next Big Disruptions in Indian AC Market

India has seen significant growth in the solar-powered ACs in the last decade, owing to the rising demand from consumers along with a considerable increase in the number of players focused on solar-powered AC technology. Various companies in India that are offering their products for this technology are Arka Technologies, Flareum Technologies, VSM Solar, Gadhia Solar Energy Systems, Suryashakti Systems, and Headway Solar, have been promoting their solar-powered AC products in the country. Gadhia Solar Energy Systems has an established solar-based air conditioning plant in the country. The company uses 100 parabolic mirror dishes in a 160-bed hospital, Muni Seva Ashram, Gujarat, to implement this idea in a realistic application. The installation has enabled the hospital to save around one ton of wood consumption every day. Along with this, there are several other organizations that are coming forward with their effective and innovative solar projects, intending to make the nation eco-friendly. Another such big initiative was announced in 2013, where a project has been implemented with the installation of solar ACs in AC coaches, with the collaboration of Indian Railways and IIT-Madras. The partnership has been planning to launch solar-powered AC train coaches in upcoming years. With the launch of such solar-powered AC’s and implementation in multiple applications, not just greenhouse gases will be reduced, national development will also get improved in the country.

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