After three years of subdued demand, the consumer durables industry is experiencing a resurgence, driven by the record-breaking summer heat. Between March and May 2024, the demand for cooling appliances such as air conditioners (ACs) and air coolers skyrocketed. The Consumer Electronics and Appliances Manufacturers Association reported a 25% growth in cooling appliance sales during this period, with the overall AC segment growing between 25% and 30%. This surge is primarily due to the extreme heat wave affecting the country.
Supply Shortages Impacting Availability
The unprecedented demand for cooling appliances has led to supply shortages. Brands like Godrej and Blue Star faced significant shortages in May and April, respectively. Despite the high demand, many consumers were able to purchase cooling appliances, although not always their preferred models. The surge in demand outpaced the supply, causing delays and limited availability of certain products.
Rising Raw Material Costs
One of the primary reasons for the anticipated price hikes is the increasing cost of raw materials. Key components such as copper and aluminium have seen price increases of 20-30%. These materials are crucial in the manufacturing of ACs and coolers, and their rising costs have directly impacted production expenses. Additionally, ocean freight prices have nearly doubled, adding further cost pressures on manufacturers.
Increased Production and Operational Costs
To meet the soaring demand, the consumer durables industry had to ramp up production quickly. This rapid scaling up has resulted in higher operational expenses, including increased labor costs and overtime pay for factory workers. Maintaining high production levels to meet market demand has further contributed to the overall cost burden on manufacturers.
Impact on Consumer Prices
Due to the supply shortages and rising costs of raw materials and production, industry experts anticipate a price increase of 2-3% for air conditioners and coolers in the next quarter. These price hikes are necessary for manufacturers to offset the higher expenses and maintain profitability. Consumers should be prepared for these potential price increases when purchasing cooling appliances in the coming months.
Conclusion
The combination of record-breaking summer heat, soaring demand, supply shortages, and rising raw material and production costs is driving the expected price hikes for air conditioners and coolers. As the consumer durables industry navigates these challenges, price adjustments are inevitable. Consumers should brace for potential increases in prices as manufacturers adapt to the new market conditions.
