Frost & Sullivan: Low Installed Base Offers Immense Growth Opportunities for Room ACs in India

The low market penetration of unitary heating, ventilation and air conditioning (HVAC) systems or the Room ACs, in the Indian market has attracted investments from numerous multinational brands. Gen Y and the middle class continue to be the most influential segments of the Indian population, triggering new social, technological and economic trends that, in turn, escalate the demand for HVAC systems. While the HVAC landscape in the country offers immense opportunities for market entrants, existing leaders may lose share to smaller companies, particularly Japanese firms that are clocking high growth rates.

New analysis from Frost & Sullivan, Strategic Analysis of Unitary HVAC Systems in India, finds that the market earned revenues of ₹126.42 billion in 2013 and estimates this to reach ₹308.60 billion in 2018. The market for inverter type air conditioners, which is at a nascent stage in India, is expected to witness massive growth of nearly 120 percent in 2014 as compared to 2013. Although the growth rate is expected to dip in 2014, in volume terms it is a 1.5 times increase. According to the National Council of Applied Economic Research, 53.3 million households are expected to own air conditioners by 2015, and 113.8 million by 2025. This report covers the market for split AC, window AC, cassette AC and floor standing AC.

"Changing lifestyles, improving technology, and higher awareness are also opening up doors for the replacement market (i.e. replacement of old, outdated product with a new one)," said Frost & Sullivan Analyst for Environment & Building Technologies Practice. "The market is swiftly moving towards energy-efficient products, and suppliers should look at extending their product portfolio to include the most efficient and less power consuming products to tap this potential."

Due to increasing temperatures, the air conditioner manufacturers in India were able to increase their topline in the first and second quarter of the calendar year 2014. Furthermore, as the ratings have been revised, the market is prone to witness a shift in the adoption of a 2-Star AC as compared to a 3-Star AC to fit their budget. Adoption of inverter ACs will be prominent in the middle-high income group, as its aids in power saving, and a gradual increase is expected to be witnessed in its adoption between 2014 and 2018. Most of this will be visible with declining overall share of 5-Star ACs. Unlike the star rated ACs, inverter AC run on variable speeds to adjust to room temperature. In the process they save around 20-25 percent energy as compared to a 5-Star AC and around 40-45 percent energy compared to a 3-Star AC.

Inverter ACs are expected to be adopted more in South India, as the region is struggling with power shortage, and even cities have regular power cuts. Further, as these regions are mostly hot and humid throughout the year, except for a couple of months during winters, they have high utilization rates. As a result, inverter ACs can help in bringing down the overall electricity consumption.

"Expanding distribution and service channels in tier II and tier III cities will be vital for high growth in the market," suggested the analyst. "With the overall market in tier I cities decreasing as real estate, IT and services companies shift their base to tier II and tier III cities, these regions will constitute the future market for HVAC manufacturers in India."

The technology advances in HVAC systems come with a higher price tag, which coupled with high inflation rates and rise in transportation costs eventually increase the price of products and affect adoption. This challenge can only be addressed through marketing activities and the creation of a high value proposition for the product. Providing easy financing schemes will boost HVAC affordability for those consumers wary of high upfront costs. Meanwhile, setting up local manufacturing bases can go a long way in reducing product costs, thus encouraging sales.

If you are interested in a virtual brochure, which provides a brief synopsis of the study and a table of contents, then send an e-mail to Ravinder Kaur/Priya George, Corporate Communications, at ravinder.kaur@frost.com / priyag@frost.com, with your full name, company name, title, telephone number, company e-mail address, company website, city, state and country. Upon receipt of the above information, a brochure will be sent to you by e-mail.

Strategic Analysis of Unitary HVAC Systems in India is part of the Building Management Technologies (http://www.buildingtechnologies.frost.com) Growth Partnership Service program. Frost & Sullivan`s related studies include: Indian Emergency Lighting Market Analysis, Analysis of Indian Automatic Door Systems Market, and Analysis of Cable Management Systems Market in India. All studies included in subscriptions provide detailed market opportunities and industry trends evaluated following extensive interviews with market participants.

About Frost & Sullivan

Frost & Sullivan, the Growth Partnership Company, works in collaboration with clients to leverage visionary innovation that addresses the global challenges and related growth opportunities that will make or break today`s market participants.

Our "Growth Partnership" supports clients by addressing these opportunities and incorporating two key elements driving visionary innovation: The Integrated Value Proposition and The Partnership Infrastructure.

• The Integrated Value Proposition provides support to our clients throughout all phases of their journey to visionary innovation including: research, analysis, strategy, vision, innovation and implementation.
• The Partnership Infrastructure is entirely unique as it constructs the foundation upon which visionary innovation becomes possible. This includes our 360 degree research, comprehensive industry coverage, career best practices as well as our global footprint of more than 40 offices.

For more than 50 years, we have been developing growth strategies for the global 1000, emerging businesses, the public sector and the investment community. Is your organization prepared for the next profound wave of industry convergence, disruptive technologies, increasing competitive intensity, Mega Trends, breakthrough best practices, changing customer dynamics and emerging economies?