Home News With shipment from China starting, AC makers breathe easy

With shipment from China starting, AC makers breathe easy

With the arrival of first shipment from China after Chinese New Year and Coronavirus led forced holidays, air conditioner makers in the country have started breathing easy. As the next leg of shipments expected to start in the next few days, AC makers feel supply disruption is ruled out. Although delayed supplies or congestion at the Indian ports could lead to a disruption for a couple of days, seeing the current situation in China which is improving, AC makers in India expect a seamless supply from China in the coming weeks.

According to industry sources, large brands have comfortable inventories, while smaller players should see some disruption due to low inventory of finished goods. However, slow demand in the domestic markets should drive exports from China, resulting in enough component supplies for the upcoming summer season.  Meanwhile, large brands have started sourcing part of their compressor requirements from other sources like Korea, Malaysia and Thailand to reduce their dependency on one source.

Further, copper prices have declined by 3% in the fourth quarter till date. Under the normal circumstances it would have been a good news for the AC makers but presently the positive impact of copper price fall has been nullified by corresponding rupee depreciation.

Compressors imports (both for AC and refrigerators) from China account for nearly 3% of the total imports from that country and it was feared that prolonged problem in operating the factories in that country would pose a problem for Indian manufacturers of air conditioners. Remember compressors constitute 35% of cost of an AC.

The AC compressor in India is manufactured by LG Electronics and primarily consumed in-house, and Highly, a China-based company with a capacity of 2.5mn units pa as on December 2019. Nearly 55% of the compressor requirements are imported.

For the AC makers summer (from April to June) is the main season when most of their sales take place.

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