Fan Prices To Rise 20% As Star Labelling Norms Come Into Force

Fan manufacturers now must display star ratings on their fans, which will be between one and five stars.

<div class="paragraphs"><p>Usha Internatinal Ltd.'s ceiling fan. (Source: Company website)</p></div>
Usha Internatinal Ltd.'s ceiling fan. (Source: Company website)

Prices of ceiling fans are set to get costlier as the mandatory star labelling regulations—similar to refrigerators and air conditioners—in the country kicks in from Jan. 1.

Under the new energy labelling mandate enforced by the Bureau of Energy Efficiency, a statutory body under the Ministry of Power, fan manufacturers must display star ratings on their fans, which will be between one and five stars. The star rating will depend on service value, i.e., the air delivery in cubic metres per minute divided by energy consumption in watts. This basically means that a higher service value will attract a higher star rating.

The intent is to lower power consumption, and the new norms will result in energy savings ranging from 30% for 1-star-rated fans to over 50% for 5-star fans.

However, a change in these norms will have a direct impact on fan prices in the market. An energy-efficient fan, according to industry executives, will cost about 8–20% more, spurring the consolidation of the market and hurting demand in light of rising prices and weak consumer sentiment.

"A minimum increase of 5% is what it will be," said Dinesh Chhabra, chief executive officer of Usha International Ltd. "As for the five-star fans, the cost implications will be higher by almost 20% as these fans will have the newer BLDC motors vis-à-vis the older induction motors, which need electronic components and magnets, both of which are imported."

Despite the short-term cost challenges, Chhabra believes that the move will have long-term positive implications.

"Though the new norms could result in a minor dip, or rather a delay in demand, fans are essential today, and once consumers become aware the price differential actually works to their advantage in the long run and also reduces their carbon footprint, demand will be on track," he said.

"The BEE-certified fans will be slightly more expensive," said Sashi Prabhu, vice president and business head, Indoor Air Quality Business, Panasonic Life Solutions India. He expects a 10–12% increase in price for entry-level fans, which account for 60% of ceiling fan sales in the organised sector.

Other manufacturers like Havells and Orient Electric also expect a marginal increase in cost due to the new norms, which will be passed on to the consumers. However, the believe that the resulting drop in demand will be a blip as consumers become more aware of the rated fans.

"By and large, we are expecting the price hikes to be in the range of 7-8%," said Rakesh Khanna, managing director and chief executive officer at Orient Electric Ltd. "While the upfront cost will increase, these fans will be far more efficient and will have a shorter payback period, eventually resulting in savings for consumers."

According to Khanna, ceiling fans account for a significant 20% of the electricity consumption in Indian households on average. "As a result, this mandate represents a massive opportunity for energy savings and lowering the nation's carbon footprint." "The fan industry will also come out with awareness campaigns around the benefits of energy-efficient fans in the coming months, thus helping consumers make more informed decisions," he said.

Saurabh Goel, president of Havells India, too, welcomed the new norms and said that the company is in the process of passing on the increased costs to consumers.

The Rs 10,000 crore Indian fan market, Goel said, has benefited from the rise in rural penetration amid increased electrification in the country. "The industry has witnessed a good growth trajectory in the past two years, and going forward, we are optimistic that it will continue at the same pace."

Volatility among fans could persist due to the BEE rating change, analysts told BQ Prime. "The new BEE ratings enforced from Jan.1, 2023, will put further pressure on the margins of electrical consumer durables players due to their cost implications, which will speed up the consolidation of markets," Praveen Sahay, research analyst at Prabhudas Lilladher Pvt., said in a Jan. 6 note.

"We also see near-term headwinds in demand due to inflation, slowdown, and changes in regulations," said Sahay. "However, we remain structurally optimistic about long-term prospects."