Room air-conditioner manufacturers are closely monitoring input costs after already raising prices ahead of the summer season. While demand prospects remain strong, companies have not ruled out another round of price hikes if geopolitical tensions escalate further.
Input cost pressures have intensified due to a combination of regulatory and macroeconomic factors. The implementation of new energy efficiency labels has added to costs, alongside a rise in prices of key raw materials such as copper, aluminium, steel and plastics. Higher freight charges and rupee depreciation have further compounded the burden. A portion of the increased costs has already been passed on to consumers.
B. Thiagarajan, managing director of Blue Star, said overall costs have risen by about 13 per cent, of which around 5 per cent is attributable to the new energy label changes, with the remainder driven by higher raw material and input costs. “I have a feeling that around 5-6 per cent would have been passed on at an industry level,” he said.
Kamal Nandi, business head and executive vice-president of the appliances business at Godrej Enterprises, highlighted multiple supply-side disruptions. “We are witnessing a restricted supply of LPG, which is used in processes such as brazing and curing of powder-coating. Additionally, there has been a limited supply of key plastic raw materials like polypropylene and polystyrene, accompanied by sharp price increases,” he said.
He added that prices are rising largely due to shortages in plastic inputs linked to crude oil, a weakening rupee, and constrained availability of LPG and PNG gas. The revision in Bureau of Energy Efficiency (BEE) norms has also impacted pricing. Further, input costs for imported components have surged due to a steep, up to threefold increase in ocean freight rates. Supply constraints in iron ore, coking coal, and oil and gas, along with tariff and non-tariff barriers, have pushed up steel prices. As a result, most brands, including Godrej, have implemented price hikes of 6–10 per cent from April 1 across categories, he said.
Analysts at Motilal Oswal noted that Voltas has already taken price increases in the range of 5–15 per cent, factoring in both BEE rating changes and raw material inflation.
Industry executives cautioned that any escalation in geopolitical tensions after the current pause could further inflate input costs, triggering additional price increases. “We are monitoring the situation closely, working with suppliers and optimising procurement strategies to minimise disruption and ensure production continuity ahead of the peak summer season. Apart from the supply chain, focus is also high on internal cost optimisation,” Nandi said.
Despite cost pressures, manufacturers are banking on a strong summer to support demand. “If we have a strong summer season as has been predicted, in volume terms there could be 15–20 per cent growth,” Thiagarajan said.
Given that a significant proportion of purchases are made through EMIs, affordability is expected to remain relatively stable. However, premium segments are likely to drive growth, while entry-level demand could be impacted by weaker consumer sentiment amid the ongoing conflict and its economic fallout, Nandi said.