India May Face AC Shortages Again This Summer As Supply Woes Worsen

"The industry is anticipating an impact on AC production in April due to a delay in compressor and component shipments," Manish Sharma, Chairman, Panasonic Life Solutions India & SA, told NDTV Profit.

Companies including Voltas, Blue Star, Godrej Appliances, Panasonic, and even contract manufacturers such as EPACK Durables Ltd.—which make ACs for firms like Samsung, Lloyd, and LG—have inventories to meet moderate demand increases of 25-30%. But a sharper spike—like the 60% surge seen last season—could lead to an 'out-of-stock' situation, they said.

"The domestic industry can manage with a 20-25% demand rise, but a larger increase could lead to an AC shortage," said Blue Star MD, B Thiagarajan.

"The industry is anticipating an impact on AC production in April due to a delay in compressor and component shipments," Manish Sharma, Chairman, Panasonic Life Solutions India & SA, told NDTV Profit.

Companies including Voltas, Blue Star, Godrej Appliances, Panasonic, and even contract manufacturers such as EPACK Durables Ltd.—which make ACs for firms like Samsung, Lloyd, and LG—have inventories to meet moderate demand increases of 25-30%. But a sharper spike—like the 60% surge seen last season—could lead to an 'out-of-stock' situation, they said.

"The domestic industry can manage with a 20-25% demand rise, but a larger increase could lead to an AC shortage," said Blue Star MD, B Thiagarajan.

That's because at least 40% of components used in making ACs are still sourced from China, which is currently fighting a trade war with the U.S.

Last year, too, the industry faced a severe shortage of ACs due to supply constraints of imported parts like compressors and copper tubes, exacerbated by geopolitical tensions. Delays in Bureau of Indian Standards certification, which mandates sourcing from certified factories, further hindered supplies. BIS is not certifying factories in China to promote local manufacturing. This year, executives worry that supply issues may worsen.

Chinese manufacturers are prioritising shipments to the US ahead of expected tariff hikes in April-May, impacting supplies to India. Additionally, a depreciating rupee is inflating import costs, compounding the crisis.

The details of how long the delayed supply of parts lasts, however, are unclear.

"Ongoing geopolitical tensions have further strained supply chains and increased logistics costs, affecting production timelines and the availability of critical components," said Voltas Chief Executive Officer Pradeep Bakshi.

Further, the depreciation of the rupee increased the cost of imported raw materials and components, affecting the final product cost, he added.

Godrej Appliances Business Head and Executive Vice President Kamal Nandi concurs. "The clearances for imports of components required to manufacture ACs are pending for over a month, and now with demand picking up, there is a rush to get these supplies." In any case, the industry is prepared for only a 25-30% increase. "If demand shoots up beyond this level, then definitely there will be a shortage of AC models in the market."

Major white goods makers are also expected to take about a 3-4% price hike in the coming months. This would make ACs costlier by Rs 1,500-2,000.

The rupee has depreciated nearly 6% against the dollar over a year, making raw materials like copper and aluminium pricey. "We can't avoid price hikes on the back of higher input costs," Godrej's Nandi said, indicating that the company will initiate hikes at the end of this month or early April.

However, price hikes are unlikely to dampen demand.

Summer arrived early this year with the country experiencing the hottest February in the last 125 years, according to the Indian Meteorological Department. The weatherman also predicts more than the usual number of “heatwave days” between March and May in most parts of the country, including Gujarat, Kerala, Telangana, West Bengal, and parts of Karnataka.

Sales have already picked up. After a strong summer last year and stock-out situations, retailers have started stocking inventory aggressively.

“The summer season is witnessing a sharp rise in AC demand, with sales doubling in the past two years. In 2023, the market stood at approximately 8.5-9 million units, surpassing 12-13 million in 2024, and is projected to reach at least 18 million units this year," said Ajay DD Singhania, chief executive at EPACK Durable Ltd. "This surge is driven by increased demand across tier 3 and 4 cities, where premium AC models are gaining popularity."

So far, sales have mainly picked up in the southern and eastern regions of the country. However, as sales rise in tandem with temperatures in the north, the industry could face a potential loss of at least half a million extra units in sales, translating to Rs 1,500-1,800 crore in lost revenue, said executives.