Room AC Sales Hit Record High of 12.5 Million Units in India, Report

The sales of room air-conditioners in India surged to a record 12.5 million units in India in FY2025, a report said on Tuesday.

Rating agency ICRA expects the volumes in the room AC market in the country to increase by 20-25% YoY.

Factors such as growing temperature levels, growing requirement of units per household, growing levels of urbanization, improvement in disposable incomes, and facilitative consumer financing opportunities are likely to propel growth in the near future.

Growing replacement demand as the demand for energy-efficient models is rising with increased usage and increasing energy costs also holds promise for the industry.

The domestic room AC industry clocked sales volumes greater than the pre-Covid peak in FY2024, thanks to changing climatic conditions and favorable consumer trends. Average heat wave days/year over the last three decades have been moving up relentlessly and CY2024 is likely to report the highest ever thus boding well for room AC demand," said Srikumar Krishnamurthy, senior vice president and co-group head – corporate ratings, ICRA.

This was seen in the just-concluded summer season where all the major OEMs clocked volume growth of 40-50 percent YoY during this period, Krishnamurthy added.

To console the developers to some extent about the prevailing cooling needs, Blue Star Director and CEO S. Krishnamurthy said that growth for the room AC market is likely to continue in a strong trajectory for the next two years. However, the growth momentum will ease out to about 10-12 per cent in FY2026. Key monitorables include the performance of important markets like North India, which contributes about 35-40 percent to industry sales.

According to the report, on the supply side, the domestic house AC capacity is expected to rise by over 40% in the next three years from its current levels.

"The fiscal benefits of the production-linked incentive scheme for components manufacturing by the Government of India have played a crucial role in the sudden spurt of the level of localisation in the Indian room AC industry. It is probable that the industry would reach 75 percent indigenisation in the next three-four years due to the ongoing backward integration by most industry players," said Krishnamurthy.

Meanwhile, Ministry of Commerce and Industry announced that it is likely to bring about a total production of components of ACs and LEDs in India of about Rs 1,81,975 crore.

The operating profit margin of room AC industry intrinsically moderate at 6.5-7.5 per cent because of the volatility of input costs amidst intense competition.

Expected to benefit from operating leverage, the industry is expected to command gradual expansion in operating margins even as an elevated level of competition is witnessed, the report said.