AC market to witness price war as MNCs enter mass segment

KOLKATA: Competition is going to heat up in the air-conditioner market next year as several of the MNC brands who were earlier in the premium segment are now entering into the mass category which may lead to a price war, multiple brokerage reports said.
As per the reports, brands like Daikin and Hitachi have started to enter into the mass-market AC segment with pricing as their weapon. Samsung too has recently indicated its intention to enter this category and re-enter window and lower priced non-inverter models.

“Room AC is the most competitive white goods category with presence of more than 50 players. The industry currently faces stiff competition, which is why it even restricted price increases in one of the strong summers in the first half of FY20,” said a report by Emkay Global.

The report said despite strong industry growth and low channel inventory, AC prices this month further dropped by around 1% from the low levels of April 2019.

Brands like Blue Star and Lloyd have cut prices of 1.5 ton 3-star fixed-speed AC by 5% and 3% this month, it said. Prices of most selling models such as 1.5 ton 3-star inverter AC had reduced by 11% from July 2018 to April 2019, the report noted.

As per a report by ICICI Securities, the entry of premium brands into mass segment will narrow the price gap with leading brands like Voltas. Voltas is the market leader in the room AC segment. The re-entry of Samsung and other brands will restrict Voltas from increasing prices, it said.

Samsung India’s AC business chief Rajeev Bhutani recently told ET that the company has set a target to become market leader in AC market by 2022 and double business in the next two years. The company will have an aggressive pricing strategy to regain back the market share it had lost in last four years when it had vacated the mass product segments and now want to re-enter.

Motilal Oswal in its report said there is a long tail of AC brands and Samsung may be able to gain market share at the cost of these fringe players in the near term.

Refrigerator and washing machine are relatively high-competition segments as compared to room AC. In refrigerator and washing machine, the top three brands contribute around 80% of the market share while in room AC the top eight brands contribute about 75% of the market.