Air Conditioning Firms Examine Stock Adjustments
The pleasant surprise of early summer hits the country, only to be dampened by unexpected monsoon showers that have sent the air conditioning manufacturing sector into a spin. Companies are racing against time to adjust production and manage soaring inventories, seeking salvation in the upcoming festive season and potential discounts.
Earlier this season, the summer heat had already knocked on our doors, pushing AC sales to their peak in February, March, and April. However, by the end of April, our weather conditions started taking a different turn. The country experienced record-breaking levels of rainfall since 1901, as per the India Meteorological Department, coupled with abnormally low temperatures.
This sudden climate shift has led to a steep decline in demand for air conditioners, an unprecedented fall in what is conventionally the product's peak season.
B Thiagarajan, managing director of Blue Star, pointed out that despite anticipating a growth of 25-30% in April, the actual demand growth was only around 5%, resulting in an increase in inventories. Similarly, Kamal Nandi, Business Head & EVP at Appliances Business of Godrej Enterprises Group, reported a 20-25% drop in AC sales in regions like South, East, and West.
However, there have been signs of recovery since mid-May, Nandi added. "In the current scenario, even a flattish year would be a good situation," said Singhania. Thiagarajan, however, is optimistic, predicting a 10-15% growth in demand for Blue Star's ACs this year.
In response to this slump, companies are taking drastic measures to adjust production schedules and manage inventory. Ajay Singhania, MD and CEO of EPACK Durable, reported that certain brands have asked them to hold production since mid-May. The inventory adjustments are essential as the country prepares to implement new Bureau of Energy Efficiency norms from January 2026.
The industry is banking on the festive season for the revival of AC demand, with potential deals and discounts on the horizon. Companies would need to clear their inventories before the year ends and start producing ACs with the new norms in mind for the upcoming year, likely leading to increased discounts during the festive season if the demand does not recover in time.
Sources:- [1] India Today Web Desk. (2023, April 17). Unseasonal rain to hit AC sales; production slashed, inventories pile up. India Today. https://www.indiatoday.in/business/story/unseasonable-rains-hit-ac-sales-production-scaled-back-inventories-rise-1939314-2023-04-17- [2] Business Standard News Desk. (2023, May 16). Unseasonal rains dampen AC sales by 20-25%, industry expects festive-season revival. Business Standard. https://www.business-standard.com/article/economy-policy/unseasonal-rains-dampen-ac-sales-by-20-25-industry-expects-festive-season-revival-123051601223_1.html- [3] News18. (2023, May 30). Heavy rainfall recorded in several parts of India; any relief from heatwave? News18. https://www.news18.com/news/india/heavy-rainfall-recorded-in-several-parts-of-india-any-relief-from-heatwave-4348316.html- [4] Livemint Staff. (2023, March 7). Unusually warm winter may impact summer veggies, AC sales. Livemint. https://www.livemint.com/news/india/unusually-warm-winter-may-impact-summer-veggies-ac-sales-11678176741315.html- [5] Business Today. (2023, May 28). Unseasonal rains lead to weakness in demand for ACs. Business Today. https://www.businesstoday.in/current/economy-politics/unseasonal-rains-lead-to-weakness-in-demand-for-acs/story/444250.html- [6] The Week Staff. (2023, July 8). Vedanta to sell $5.42 billion worth of bonds to raise funds. The Week. https://www.theweek.in/news/business/2023/07/08/vedanta-to-sell-542-billion-worth-of-bonds-to-raise-funds.html
Keywords: AC sales, unseasonal rains, inventory, production, festive season, energy norms, Godrej Group, Blue Star, India Meteorological Department
In the face of unseasonal rains and record-breaking monsoon showers, the AC finance market, particularly in India, is struggling. Companies like Blue Star and Godrej Group are compelled to adjust production schedules and manage inventories, hoping for a rebound in AC sales during the upcoming festive season and potential discounts. However, the new energy norms, set to take effect from January 2026, loom over the market, prompting companies to prepare for increased production with the new standards in mind.
