Unseasonal rains have dampened the country’s early summer demand for air conditioners this year and companies are now taking measures to adjust their production to avoid inventory pile-up.
The year started on a high note with summer demand kicking early, spiking AC sales in February, March and April.
However, this started changing by the end of April. In May, the country witnessed the highest rainfall since 1901 and the lowest average daytime temperature in the last four years, according to the India Meteorological Department.
This led to a sharp dip in demand for ACs, in what is typically the category’s peak season.
Blue Star managing director B Thiagarajan, in an interview, said that as compared to the anticipated growth of 25-30% in April, the demand growth was only around 5%, leading to higher inventories.
Kamal Nandi, Business Head & EVP at Appliances Business of Godrej Enterprises Group, said that South, East and West have together reported a 20-25% drop in AC sales, mainly due to the first 15 days of May.
However, he added that since mid-May, there have been signs that the demand is returning.
“In the current scenario, even a flattish year would be a good situation,” said Singhania. Thiagarajan, however, still expects the demand for their ACs to increase 10-15% this year.
“Accordingly, production levels have been optimised to ensure there is no piled-up inventory,” he said.
Talking to FE on Tuesday, Ajay Singhania, MD and CEO of OEM (Original Equipment Manufacturer) and ODM (Original Design Manufacturer) major EPACK Durable, said that since mid-May, certain brands have asked them to hold production.
“Brands are in a situation where they need to do some adjustment in the production schedules going forward,” he said, adding that companies are revising their forecast for the June-July period.
“In the current scenario, even a flattish year would be a good situation,” said Singhania.
The inventory adjustment is also necessary as the country will implement the new Bureau of Energy Efficiency norms from January 1, 2026.
Apart from rains, companies had also started increasing their inventory, by the end of March, anticipating a shortage in the supply of compressors amid higher demand this year.
The industry is now betting on the festive season for the revival of AC demand. Typically, the demand returns by the end of Q2 and in Q3.
Singhania said that the companies would need to clear their inventories before the year ends and start producing ACs with newer norms for next year from October.
This, industry executives say, may lead to higher discounts during the festive season if the demand does not return before that.
