Room AC Market
The room AC segment comprises of window and split ACs. The market has a size of Rs. 3800 crores in India. Window ac’s account for about 54% of the total market for ac’s with an estimated market size of about 30 bn .
The room air-conditioning segment is characterised by large players like Carrier Aircon, LG, Samsung, , Amtrex-Hitachi, etc. LG has been successful in dethroning Carrier from No.1 position in the room AC segment, followed by Samsung and Hitachi.. . Samsung, for instance, has captured a 15% share in room ACs since it came here in May 1998. LG has wrested a creditable 19% share in less time .
A sales growth of 300 per cent in 2002 over 2003 (40,000 ACs sold in 2003 over the 10,000 in 2002) finds it talking very confidently.
It started importing in January 1998 but sensing the opportunities lying ahead, built a plant near Delhi at Noida ,others like Hitachi, chose to pick up stake in Amtrex. While some others have gone in for a technical arrangement (for eg. Blue Star with York, USA). M/s. Trane of USA .
Market Share( Organized Sector)
Room ACs Share
LG 19
Samsung 15.5
Amtrex Hitachi 15
Carrier 12
National 11
Voltas 8.5
Videocon 5.4
Bluestar 5
Godrej 3
Others 5.7
The room ac segment is having a close rat race as compared to the central ac market. LG has emerged as the leading player with respect to its innovation in offering superior products . It changed the definition of ACs by terming them as health air systems.
LG has registered a growth of 110%yoy in the year 2000 against an overall industrial growth of 30%. LG’s market share jumped to 30% in 2000 from 19% in 1999. LG now claims to be in the number 1 position in the RAC segment. LG’s entry is already taking a toll over established companies like Carrier Aircon and Hitachi.
Korean major Samsung and Hitachi are fighting a close battle for the second place. Both are relying on strong innovation and marketing to increase their market shares.
Carrier Aircon is second in the RAC race with a 21% share in window ACs. Its market share in split ACs is about 35%. During the first 9 months of FY01, net sales stood at Rs3.51bn (up by 21%). To compete with players it has launched models of Toshiba.
Amtrex Hitachi is a joint venture with Hitachi Japan and has a 11% share in the window AC segment and 15% share in the split AC segment. After going through some stagnant period, the company is now ready to take on the competition with its new range of products.
After a successful comeback in FY00, the company slipped into red again during the first nine months of FY01registering a net loss of Rs7.4mn against a gain of Rs6.2mn last year. However, the topline has soared by 31% to Rs1.6bn during the said period.
The company’s problem is that of falling operating margins due to rising total expenditure. Amtrex has recently launched a new digital range of split &window ACs called 'Logicool'
Its mini split ACs registered a 25% volume growth to improve its market share from 20-25% in FY01. Also with its launch of Verdant range of ACs, Voltas registered a 28% volume growth improving its market share from 11% to 17%.
Geographical Distribution Of ACs
Cities Market Share
Delhi 28
Mumbai 35
Hyderabad 04
Kolkatta 04
Banglore 02
Chennai 07
Others 20
The above figures explain that the sale of ACs is restricted to metros. This is so because the ACs still have a very low penetration as compared to other durable goods.
They are last in the priority list after refrigerators , washing machines, vacuum cleaners, microwave ovens. Also people don’t have that much disposable income to operate and maintain an AC. With increasing finance options the scenario is expected to improve but it will take some time for ac as a product to really come into the reach of a middle class consumer.
Entry of New Players.
A notable feature of the reform period has been the coming of foreign players into the Indian market Among the new brands jostling for space with the older players this summer are: Electrolux-White Westinghouse and Whirlpool from the US, Fujitso General Ltd and Daikin from Japan and TCL from China. Needless to say, the entry of a host of new brands will impact the AC market in India dominated by players like Carrier Aircon, LG, Samsung, Godrej, National, Blue Star, Voltas etc.
The reasons why more and more brands are entering the Indian market is that the penetration level of ACs in India is barely 2 per cent and so the market is extremely attractive.
Secondly, the home segment witnessed an almost 30 percent growth in the last two years compared to the commercial segment. This is because AC is no longer perceived to be a luxury, and better distribution network, finance schemes and large scale advertising have grown the market.
Small wonder, Daikin Shriram, the new 80:20 JV between $ 4.5 billion Japanese company Daikin and the Siddharth Shriram group company Siel Ltd, aims to grab a 18 per cent share of the premium AC segment. A 0.75 tonne Daikin AC costs Rs 39,000.
Meanwhile, Electrolux India has brought in its world - renowned White Westinghouse brand of AC which offer an attractive six year guarantee and hopes to capture approximately five per cent market share.Having test-marketed its ACs last summer, Whirlpool launched its products earlier this summer.
The new Whirlpool AC Range is targeted primarily at the house hold segment. They are offering a comprehensive range of 8 new world class models and hope to get a 10 per cent market share by 2003.The AC market is currently witnessing a proliferation of brands. However, a shakeout is imminent in the next 18-24 months. Secondly, branded players will gain market share at the expense of the unorganised sector. If the unorganised versus organised sector marketshare ratio was 60:40 in 1997-98, it changed to 30:70 in 2000-2001.
The unorganised sector is likely to lose another 10 per cent share this year, thanks to the new players coming in the market.
Evasive Action By Established Players
Brand proliferation will also make life difficult for the branded players. Most of them, therefore, are investing heavily in advertising and marketing besides offering a wider choice of models. . Considering that there has virtually been no change in the AC prices this year, the market is likely to see a 20 per cent growth. Considering that besides microwaves, this is the only category in consumer durables that is growing at over 20 per cent, AC manufacturers are going all out to woo the Indian consumers.
The established players are taking the following steps to consolidate their position in the market.
Samsung
Korean major Samsung too has added two new models to its range and hiked its spends on ACs by 15 per cent. It is also using the Internet for speedy order and delivery of spare parts. It is offering a combination of better services, features and a zero per cent finance schemes to garner more market share. To fortify their position the company plans to expand their dealer network to 2000 from current 1500.
LG Electronics
LG has increased its advertising budget to Rs 25 crores and is planning to invest over 200 crore in R&D along with increasing its distribution network. It is working on incorporating its plasma technology in window ACs as well. It would be pumping $ 230 mn in India by 2005 to expand manufacturing facilities.
Carrier Aircon
Carrier is launching 40 models this year to regain its leadership. Carrier's advertising budget this year is Rs 17 crore while the company is expanding the distribution network for the home segment from 440 to 1,250 retail outlets.
Hitachi
Hitachi is relying on its new range of Logicool air conditioners to increase its market shares backed by strong promotional budget which has been increased from 8 crores last year to 20 crores for the year 2001-02.
The room AC segment comprises of window and split ACs. The market has a size of Rs. 3800 crores in India. Window ac’s account for about 54% of the total market for ac’s with an estimated market size of about 30 bn .
The room air-conditioning segment is characterised by large players like Carrier Aircon, LG, Samsung, , Amtrex-Hitachi, etc. LG has been successful in dethroning Carrier from No.1 position in the room AC segment, followed by Samsung and Hitachi.. . Samsung, for instance, has captured a 15% share in room ACs since it came here in May 1998. LG has wrested a creditable 19% share in less time .
A sales growth of 300 per cent in 2002 over 2003 (40,000 ACs sold in 2003 over the 10,000 in 2002) finds it talking very confidently.
It started importing in January 1998 but sensing the opportunities lying ahead, built a plant near Delhi at Noida ,others like Hitachi, chose to pick up stake in Amtrex. While some others have gone in for a technical arrangement (for eg. Blue Star with York, USA). M/s. Trane of USA .
Market Share( Organized Sector)
Room ACs Share
LG 19
Samsung 15.5
Amtrex Hitachi 15
Carrier 12
National 11
Voltas 8.5
Videocon 5.4
Bluestar 5
Godrej 3
Others 5.7
The room ac segment is having a close rat race as compared to the central ac market. LG has emerged as the leading player with respect to its innovation in offering superior products . It changed the definition of ACs by terming them as health air systems.
LG has registered a growth of 110%yoy in the year 2000 against an overall industrial growth of 30%. LG’s market share jumped to 30% in 2000 from 19% in 1999. LG now claims to be in the number 1 position in the RAC segment. LG’s entry is already taking a toll over established companies like Carrier Aircon and Hitachi.
Korean major Samsung and Hitachi are fighting a close battle for the second place. Both are relying on strong innovation and marketing to increase their market shares.
Carrier Aircon is second in the RAC race with a 21% share in window ACs. Its market share in split ACs is about 35%. During the first 9 months of FY01, net sales stood at Rs3.51bn (up by 21%). To compete with players it has launched models of Toshiba.
Amtrex Hitachi is a joint venture with Hitachi Japan and has a 11% share in the window AC segment and 15% share in the split AC segment. After going through some stagnant period, the company is now ready to take on the competition with its new range of products.
After a successful comeback in FY00, the company slipped into red again during the first nine months of FY01registering a net loss of Rs7.4mn against a gain of Rs6.2mn last year. However, the topline has soared by 31% to Rs1.6bn during the said period.
The company’s problem is that of falling operating margins due to rising total expenditure. Amtrex has recently launched a new digital range of split &window ACs called 'Logicool'
Its mini split ACs registered a 25% volume growth to improve its market share from 20-25% in FY01. Also with its launch of Verdant range of ACs, Voltas registered a 28% volume growth improving its market share from 11% to 17%.
Geographical Distribution Of ACs
Cities Market Share
Delhi 28
Mumbai 35
Hyderabad 04
Kolkatta 04
Banglore 02
Chennai 07
Others 20
The above figures explain that the sale of ACs is restricted to metros. This is so because the ACs still have a very low penetration as compared to other durable goods.
They are last in the priority list after refrigerators , washing machines, vacuum cleaners, microwave ovens. Also people don’t have that much disposable income to operate and maintain an AC. With increasing finance options the scenario is expected to improve but it will take some time for ac as a product to really come into the reach of a middle class consumer.
Entry of New Players.
A notable feature of the reform period has been the coming of foreign players into the Indian market Among the new brands jostling for space with the older players this summer are: Electrolux-White Westinghouse and Whirlpool from the US, Fujitso General Ltd and Daikin from Japan and TCL from China. Needless to say, the entry of a host of new brands will impact the AC market in India dominated by players like Carrier Aircon, LG, Samsung, Godrej, National, Blue Star, Voltas etc.
The reasons why more and more brands are entering the Indian market is that the penetration level of ACs in India is barely 2 per cent and so the market is extremely attractive.
Secondly, the home segment witnessed an almost 30 percent growth in the last two years compared to the commercial segment. This is because AC is no longer perceived to be a luxury, and better distribution network, finance schemes and large scale advertising have grown the market.
Small wonder, Daikin Shriram, the new 80:20 JV between $ 4.5 billion Japanese company Daikin and the Siddharth Shriram group company Siel Ltd, aims to grab a 18 per cent share of the premium AC segment. A 0.75 tonne Daikin AC costs Rs 39,000.
Meanwhile, Electrolux India has brought in its world - renowned White Westinghouse brand of AC which offer an attractive six year guarantee and hopes to capture approximately five per cent market share.Having test-marketed its ACs last summer, Whirlpool launched its products earlier this summer.
The new Whirlpool AC Range is targeted primarily at the house hold segment. They are offering a comprehensive range of 8 new world class models and hope to get a 10 per cent market share by 2003.The AC market is currently witnessing a proliferation of brands. However, a shakeout is imminent in the next 18-24 months. Secondly, branded players will gain market share at the expense of the unorganised sector. If the unorganised versus organised sector marketshare ratio was 60:40 in 1997-98, it changed to 30:70 in 2000-2001.
The unorganised sector is likely to lose another 10 per cent share this year, thanks to the new players coming in the market.
Evasive Action By Established Players
Brand proliferation will also make life difficult for the branded players. Most of them, therefore, are investing heavily in advertising and marketing besides offering a wider choice of models. . Considering that there has virtually been no change in the AC prices this year, the market is likely to see a 20 per cent growth. Considering that besides microwaves, this is the only category in consumer durables that is growing at over 20 per cent, AC manufacturers are going all out to woo the Indian consumers.
The established players are taking the following steps to consolidate their position in the market.
Samsung
Korean major Samsung too has added two new models to its range and hiked its spends on ACs by 15 per cent. It is also using the Internet for speedy order and delivery of spare parts. It is offering a combination of better services, features and a zero per cent finance schemes to garner more market share. To fortify their position the company plans to expand their dealer network to 2000 from current 1500.
LG Electronics
LG has increased its advertising budget to Rs 25 crores and is planning to invest over 200 crore in R&D along with increasing its distribution network. It is working on incorporating its plasma technology in window ACs as well. It would be pumping $ 230 mn in India by 2005 to expand manufacturing facilities.
Carrier Aircon
Carrier is launching 40 models this year to regain its leadership. Carrier's advertising budget this year is Rs 17 crore while the company is expanding the distribution network for the home segment from 440 to 1,250 retail outlets.
Hitachi
Hitachi is relying on its new range of Logicool air conditioners to increase its market shares backed by strong promotional budget which has been increased from 8 crores last year to 20 crores for the year 2001-02.