Demand for room air conditioners is set to soar as the industry gears up for a scorching summer. But availability of compressors remains an overhang with the industry anticipating that it could take at least three years to achieve self-reliance and reduce dependence on imports.

On February 28, the IMD had predicted that the hot weather season (March-May) will see above-normal maximum temperatures in most parts of the country except isolated pockets in parts of peninsular India and Northeast India. This has prompted AC dealers to start stocking up ahead of a demand surge.

“This year we are expecting a 25-30 per cent growth for the RAC (residential air conditioners) industry on a strong base of last year,” said B. Thiagarajan, managing director, Blue Star.

“With the air conditioning market set for another strong summer, Voltas is prepared to meet the growing demand with our innovative and energy-efficient solutions. Following a record growth trajectory last year and a strong first half of FY25, we are optimistic about the continued momentum in the RAC sector,” said Pradeep Bakshi, managing director and chief executive officer, Voltas.

“Summers have democratised the demand for cooling appliances, especially ACs, converting them from a discretionary purchase for a higher class of consumers to an essential item for the broader population across geographies,” said Kamal Nandi, business head and EVP at the appliances business of Godrej Enterprises Group.

He said while the industry is witnessing a 30-35 per cent growth in ACs, Godrej is targeting a 50-70 per cent growth by value in AC sales for the ongoing summer season.

Analysts echoed the view of the manufacturers.

“The Indian RAC market is expected to grow at around 15 per cent CAGR over the next five years, driven by low penetration levels (around 11-12 per cent vs over 150 per cent in China), increasing affordability through sustained energy efficiency improvement and consumer financing schemes, amid improving power availability and rising temperatures,” said Emkay Research in a report.

Emkay said that urban AC demand remains largely replacement-driven, while growth in smaller towns is driven by the addition of first-time buyers. However, seasonality remains a potential key risk.

Compressor concern

The domestic AC manufacturers primarily meet a significant part of their requirement of compressors, a vital component in the air conditioners, through two Chinese manufacturers — GMCC and Highly — which have set up bases in India.

In addition to the domestic supply, compressors are also imported from other countries such as Taiwan, Japan and Thailand.

“The requirement of compressors will increase in line with growing AC demand (12-15 per cent year-on-year). If BIS certification for Highly and GMCC is not extended, the industry will be further constrained in terms of compressor shortage,” said Motilal Oswal in a report.

There are also concerns over increased AC demand in China because of government subsidies and supply disruptions due to US tariffs. The combination of the above factors has prompted the industry to request the government to allow imports to fill the demand.

“There is a compressor and copper tube shortage on an industry level as these are essential imported components. At Godrej, we have taken pre-emptive measures ensuring that we are adequately prepared to meet seasonal demand,” Nandi said.

In a recent measure, the government has reportedly lifted the BIS certification requirement for critical components like grooved copper tubes and AC compressors of 2 tonnes and above with an exemption also applicable to those imported from China.