A late start to summer has dented air-conditioner demand across South India, pushing out the seasonal uptick by roughly a fortnight, according to a note by brokerage Axis Capital. While inventories remain elevated, they are described as 'manageable', with price stability currently supported by old-rated stock ahead of new energy-efficiency norms that will make air-conditioners dearer.
Axis Capital's conversations with leading retailers indicate that the Room Air Conditioner (RAC) industry fell about 20% in January and was down roughly 10% in February. The brokerage expects momentum to improve 'anytime soon' as temperatures rise across the southern states.
New BEE Models To Raise AC Prices
The imminent rollout of Bureau of Energy Efficiency (BEE) 2026 models is set to drive RAC pricing. Axis Capital estimates 5-star AC prices will rise by 10–12%, while 3-star units may see a 6–7% increase. The note also flags potential price hikes in refrigerators due to rising copper costs, which are inflating production expenses.
Retailers in the South are carrying more stock than ideal but below last year's bulge. Axis Capital highlights that old-rated inventory should help keep price tags steady through March, buying the industry time before the new BEE-compliant models becomes the norm. The note points to heavy inventory pushing by Voltas and Daikin in Q3, while Lloyd saw a strong January after December sales were deferred in South India.
AC Inforgraphics
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Sathya Agencies In Focus: Outgrowing A Shrinking Market
Axis Capital highlighted Sathya Agencies, among South India's largest electronics chains, as a notable outperformer. While the RAC industry began FY26 with an approximately 35% decline, it improved to a 10–15% decline currently. Sathya has managed a 20% approx growth in 9MFY26 across categories, driven by store additions and aggressive promotions.
Sathya was down about 40% YoY in January (versus industry down 20%) but stabilised to flat in February. LG and Voltas are cited as outliers on the upside year-to-date.
Summer's Late Arrival Dampens Demand
Kerala typically enters its hot phase from Jan 15 Jan, but this year demand revived only in the last 10 days of February, which is about a 15-day delay, according to the note. Similar slippage is evident across the southern market, though retailers expect an improvement over the next 4–5 days as temperatures climb.
In the near term, the weather is the swing factor. A swift and sustained rise in temperatures should absorb elevated RAC inventories and smooth the transition to costlier BEE-compliant models.
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