Prevailing cold weather notwithstanding air conditioner manufacturers may not be deterred from taking an aggressive pricing strategy in the coming days. Companies like Blue Star have already taken a price hike of about 5%. Market survey also reveals that Voltas has also taken price hike starting December for 3-star inverter AC to an extent of Rs 1,000. These manufacturers have also indicated that further price may not be ruled out. Sensing the mood of the manufacturers, some of the dealers have increased the stocks of AC units.
Meanwhile an interaction with the dealers suggest that inventory level in the market is slightly higher than the normal level. Though festive demand was good, it was not enough to bring down the inventory to the normal level. According to dealers, October month saw good uptick in the demand which was followed by decent sales in November too. However, sales in December has been lower and even enquiries are less due to onset of strong winter in North India. According to dealers, any price hike at this juncture may impact the demand for the AC units.
But the fact is that the industry cannot postpone the inevitable for too long. Raw material costs have gone up meaningfully since March 2020 and industry will have to pass it onto the customers. Over the last 12 months, there has been a sharp increase in key raw materials such as steel (up 29% YoY), copper (up 22% YoY) and polysterene (up 19% YoY). This will have substantial impact on cost of production as these components constitute 40-60% of the overall constituents of an RAC.