Unprecedented demand triggers supply apprehensions in AC market

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This is an industry that draws comfort from the rising discomfort level every summer and this year has brought cheer like no other. A symphony of heat and humidity is large parts of India has kicked up the demand for AC machines to such a level that most manufacturers have been taken by surprise, The Economic Times has reported.

As a result of this unprecedented demand, installing a machine is taking up a lot of time – up to a fortnight – and there is an apprehension of stocks being exhausted quickly. Summer has been at its oppressive best with the temperatures in several cities and towns rising 4-5 degrees Celsius above normal with the east suffering from stubborn heatwave.

With the mercury level routinely crossing the dreaded 40 degree of the Celsius scale, sales have zoomed up to 300% of that recorded at the same time in 2023, the report said. Even areas with low sales have recorded brisk bookings of air conditioners.

One of the factors that has caught the industry by surprise is that only three weeks of April have passed and the height of summer is yet to arrive, especially in the northern plains.

“No one in the industry anticipated this high sale — it’s a record year,” Daikin India MD KJ Jawa told the newspaper.

Retail chains are struggling to keep up supply. Kolkata-based Great Eastern Retail which has 51 outlets, sold about 1,200 machines a day in 2023 in West Bengal and Odisha. It has already averaged 1,800 a day this year. Vijay Sales runs 135 stores in Maharashtra, Gujarat, Delhi-NCR and Andhra Pradesh. Its last year’s average of 2,500 machines a day has been dwarfed by the average of almost 4,000 units this year. The retail outfit Girias, which manages 150 stores in Karnataka, Tamil Nadu and Puducherry, is recording a daily average of 1,500 this year compared to 500-600 ACs it managed to sell in 2023.

Hard-pressed to install and service the sudden surge in demand, retailers are taking about 10-12 to oblige their impatient customers. Girias director Nitesh Giria told the newspaper that companies are also dispatching teams from other regions to cities such as Coimbatore, Bengaluru and Hubli where installation time has risen to 7-10 days.

Industry executives also apprehend that worse might be in store with manufacturers running out of stock to deliver machines since key components such as compressors running low. “The industry as a whole is struggling with a shortage of on-field installation teams in markets like the south where there is an unprecedented demand increase. Supplies too could become stressed now as we don’t have so many components in stock to expand production as per the current demand,” said Daikin’s Jawa.

Pradeep Bakshi, MD of Voltas confirmed that both sales of AC and air cooler have zoomed at unprecedented pace in the past one month, thanks to the heat waves in several states. “Companies are grappling with supply chains. As soon as stock is reaching stores, it evaporates,” he said.

Adding to the scare of supplies running out to meet the rising demand, sales have started to rise in north India which has traditionally accounted for most of the AC and air cooler market. Companies are already scampering to dispatch stocks to the north, south and east to whet the demand.

Tamil Nadu-based electronics retailer Viveks CEO Shankar BK said that smaller towns have witnessed the biggest surge. This has compounded the situation where companies do not have a large network of installation personnel.