Unexpected AC demand forces manufacturers to airlift components from abroad - Hindustan Times

Unexpected AC demand forces manufacturers to airlift components from abroad

Jun 19, 2024 08:12 PM IST

Companies are airlifting components from many countries like China, Taiwan, Thailand, Malaysia and Japan as traditional delivery via ocean takes more time.

Air-conditioning manufacturers in India are airlifting components, such as compressors, cross-flow fans/motors, to meet the spike in demand due to the unrelenting heatwave in most parts of the country that has driven AC sales to record numbers, industry players said.

Air conditioners installed at a building near Jhandewalan, in New Delhi (Biplov Bhuyan/ Hindustan Times)
Air conditioners installed at a building near Jhandewalan, in New Delhi (Biplov Bhuyan/ Hindustan Times)

The companies are emergency-airlifting components from global suppliers from many countries, such as China, Taiwan, Thailand, Malaysia and Japan, to keep their production going and supply line intact, as the traditional delivery via ocean freight takes more time.

Some players have increased prices by 4-5 per cent, passing on the price hike in metals like copper and aluminum to customers.

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Moreover, installations are taking a week or more at several places as the existing service network is unable to tackle new connections or service requests, some players said.

The room air-conditioning industry has witnessed a growth of about 50 per cent in the last three months, which was beyond expectations, said Daikin Airconditioning India Chairman and Managing Director Kanwaljeet Jawa. "For some of the components, some companies had shortages and they may have been airlifted, but the industry is definitely in a very, very buoyant mood," Jawa told PTI.

The industry does not have that kind of component backup here as an ecosystem is still being created in India under the PLI scheme, the players said.

Panasonic India Chairman Manish Sharma said, "While, we had done our production planning basis targets and expanded the local value addition by shifting the component base to India, we have had a shortfall for compressors and controllers of around 15-20 per cent and we have had to airlift these components from overseas, to meet the market demand due to extended and hottest summer in years," said Sharma.

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Blue Star Managing Director B Thiagarajan said the industry was prepared for up to 25-30 per cent growth and no one had planned for a 70-80 per cent rise in demand.

"When the growth is 70-80 per cent, there will be a shortage. You have to either airlift or forgo the sale, that is a truth," he said, adding, "What the industry sells in one year, has sold in three months this season."

"The growth in March was 40 per cent, 80 per cent in April, and 70 per cent in May. June is going to see another 70 per cent growth," he said.

Therefore, companies are trying to manufacture more and more and airlifting of components is happening, which is common in the industry.

According to an industry insider, generally a company maintains inventory planning three months of advance production, generally shipped through ocean freights. However, a sudden spike in demand has led to emergency airlifts.

The room AC industry is still import-dependent, dominating on average around 60-65 per cent of product value.

"The industry imports compressors, PCBs and fan motors. It also imports copper and aluminium," Jawa said, adding that it comes from markets "such as Taiwan, China, Thailand, Malaysia. So these are the main markets".

Asked if Daikin has also airlifted components, he said, "Fortunately we were a step ahead. We had put up our own manufacturing facility in Sri City that helped us a lot on the compressor front. At the same time, NIDEC Corp, which is a Japanese company, had put up a motor factory just opposite our factory."

However, Daikin faced some problems with PCBs (printed circuit board) and some small components, which were airlifted from Japan.

Also Read | Heat wave in Delhi pushes peak power demand to all-time high of 8,656 MW

On the price hike, Jawa said metal prices have gone up and prices may go up to 2-3 per cent.

Godrej Appliance Business Head & Executive Vice President Kamal Nandi said there has been a 20 per cent increase in copper and aluminium prices.

"We managed to retain prices in Q1 because most raw materials were ordered in Q4. However, materials ordered in Q1 for Q2 production will be at higher prices, so a 2-3 per cent price hike is likely, especially in ACs and refrigerators due to their high copper and aluminium content," he said.

Expressing similarly, Sharma said: ”the increasing prices of aluminium and copper have also laid additional stress on margins so we will see an increase of 4-5 per cent in Air Conditioner prices soon.”

Thiagarajan added that the room AC industry does summer planning in November and stocks are built. As stock for a year has been sold out in the last three months and materials are sourced at a high price, obviously there would be a price increase.

He also anticipated that the festival demand this year would be lower this year.

Industry body CEAMA estimated the Indian AC industry to be around 14 million units this year.

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