INDUSTRY NEWS

After Tvs, Samsung Will Now Stop AC Manufacturing In India

Published Date | 2019 February 21

After a hike in customs duty, Samsung India has started importing AC from Vietnam through the free trade agreement route expecting to fuel the Air conditioner market in India.
India: After the increase in customs duty on AC compressors, Samsung India has started importing air-conditioners from Vietnam through the free trade agreement (FTA) route as it has become cheaper. The Samsung AC market share shrinks significantly since FY16 has started importing its premium Wind-Free range. However, not all brands would benefit from such imports like Samsung since they don’t have a manufacturing base in the ASEAN FTA nations. AC becomes the second product Samsung has started importing in India after television, in which case also importing components is costlier. Air Conditioners MarketAccording to Executives Company expect to scale up imports to other AC models and utilize the AC production facility in its Chennai plant for other products as the increase in import duties on compressors to 10% from 7.5% has made imports of full ACs under FTA cheaper. The government had doubled customs duty on ACs to 20% in September, while also hiking duties on compressors.  The industry is largely dependent on imported compressors — which accounts for 60-65% of an AC’s production value — since domestic capacity does not even cover 30% of total sales. Samsung had also planned to curb mobile phone manufacturing, including the flagship models Galaxy S9 and Note 9 unless the government delayed a Make in India plan for smartphone components such as display and touch panels. The Centre finally postponed the plan to next year. Meanwhile, Chinese AC component maker Haier Group is expanding its compressor unit in Gujarat, while Guangdong Meizhi Compressor is setting up a new compressor plant. According to BlueWeave Consulting, Samsung was the second largest AC maker in India. Samsung lost out in the leadership game after it exited the low-priced window AC segment which accounts for one-third of the market and the entry of low-priced brands including some operating in the online space only. Today Voltas is the largest brand in the market with more than 22% share followed by LG India at 17.7%. The company is aiming to grow faster than the market this year to regain some lost ground, and will be launching a new product line of ACs with ‘triple inverter technology’.  Import from Vietnam is marginal capacity as compared to what Samsung sells in India. Air conditioners were once a luxury products, however currently changing into a necessity. Commercial and residential space-cooling demands growing steady all across India. Moreover constantly rising temperature along with increasing purchasing power, increasing government spending towards public infrastructure have increased the air conditioner market in the country. Growing retail and hospitality sectors, rising construction activities in most of sectors such as new airports, metros, and new housing societies together with the increasing institution, development of new commercial hubs etc have driven the market for air conditioners in India. Additionally, advanced technology in air conditioners, like inverter technology, smart air conditioners, etc., is further anticipated to augment the demand for air conditioners across India in the near future. According to the recently published report by BlueWeave Consulting on, “GCC Air Conditioners Market, by Type (Centralized AC, Split AC, Window AC, Packaged AC, Portable AC and Others), by Application (Residential & Commercial), by Country (Saudi Arabia, UAE, Kuwait, Qatar, Oman and Bahrain); Size and Forecast, 2014-2025” GCC Air Conditioners market is expected to grow with a CAGR over 7.93% during the forecast period 2018-2025, owing to changing climatic conditions, and changing consumer lifestyle. The hot days/nights based on temperature thresholds reveals that summers are expanding and winters are shrinking. The increasing trend of intense heat may cause health problems in the region. The observed trend of temperature increase is alarming, thereby GCC region is likely to witness temperatures rise to 60 degrees in coming years if GCC climatic change and urban planning problems are not resolved. Hence, air conditioners usage and demand in residential buildings is growing enormously, protecting people indoors, increasing people efficiency and reducing the child mortality rate. Thus, with the increasing business sector demand for air conditioners will also grow at an escalating rate and will propel the GCC Air Conditioners market over the forecast period. According to BlueWeave consulting upcoming report Title – “India Air Conditioners Market, by Type (Centralized AC, Split AC, Window AC, Packaged AC, Portable AC and Others), by Application (Residential & Commercial), by Region (North, West, East and South); Size and Forecast, 2014-2025,” India Air Conditioners market is expected to grow at a significant growth rate during the forecast period owing to changing climatic conditions, and changing consumer lifestyle. The Northern region has captured a major share in the overall air conditioner market followed by the Southern and Western region due to constantly rising temperature along with increasing purchasing power of the consumers is further fueling growth in the India air conditioners market.