Rising AC Prices: Supply Chain Woes and Rupee Depreciation to Hit Consumers

Pune, 28th February 2025: With summer fast approaching, air conditioner (AC) prices are set to climb due to a combination of rising import costs and supply chain disruptions. Industry players warn that customers may face limited choices and higher price tags as key AC components, especially compressors, face shipment delays.

The depreciation of the rupee by over 5% against the US dollar in the past year has significantly increased costs for both imported and locally sourced raw materials. “Fluctuating exchange rates and rising import costs are forcing us to reconsider pricing strategies. We expect to implement price adjustments by the end of the month,” said a senior official from a leading private firm.

Adding to the challenges, ongoing geopolitical tensions have disrupted global supply chains, increased logistics expenses, and delayed shipments of crucial components. “The availability of compressors and other essential AC parts is being impacted by logistical hurdles, and this is affecting production timelines,” an industry expert explained.

Despite improvements in India’s local AC manufacturing ecosystem, thanks to the government’s Production-Linked Incentive (PLI) scheme, the domestic production of AC components is still insufficient to meet demand.

India requires around 14 million AC units annually, but the local compressor manufacturing capacity can support only about 8 million units, according to industry sources. “While India is making progress, dependence on Chinese imports remains significant,” an industry executive admitted.

At least 35% of AC components—including compressors—are still imported from China, and factors such as strong domestic demand in China and efforts to expedite shipments to the US before expected tariff hikes in April-May have further strained supplies to India. “There is growing concern that AC production in April could be impacted due to delays in compressor shipments,” said the owner of another company.

Supply shortages have also been aggravated by certification issues. Some Chinese suppliers are facing delays in securing recertifications from India’s Bureau of Indian Standards (BIS), affecting their ability to export components to India. “One major Chinese supplier’s BIS certification is set to expire in June, which will add further complications,” noted the expert.

Although two large Chinese compressor manufacturers have set up production facilities in India, their combined output meets only 25% of total demand, Gupta added.

Despite price hikes, consumer demand for ACs remains strong, supported by financing options such as easy EMIs. However, stock shortages could mean that buyers might not get their preferred brand or model. “There is a high probability that some brands or specific models may be unavailable,” said Nilesh Gupta, Director at Vijay Sales.

With forecasts predicting an early and intense summer, manufacturers are gearing up for a surge in demand. “Despite supply challenges, the AC industry is expected to witness a 25% growth in sales this year,” said the expert pointed out.

As temperatures rise, consumers may need to make faster buying decisions to secure the AC model of their choice before stocks run low.