Blue Star flags price hike due to demand uncertainty

Mohit Sud, Group President, Unitary Cooling Products at Blue Star Limited, has cautioned that unpredictable weather conditions ahead of the onset of summer, along with multiple headwinds—including price hikes, volatile weather patterns, and subdued consumer sentiment—could impact air-conditioner (AC) demand this year.

Speaking exclusively to Bizz Buzz/ Hans Business, Sud said it is “too early” to categorically predict whether the upcoming summer will be strong or weak for the industry, noting that early indicators remain mixed across regions.

The industry is witnessing an unprecedented rise in prices, with end consumers expected to bear a net increase of about 7–8 per cent. Sud attributed this to a combination of rising raw material costs and regulatory changes.

“Raw materials such as copper, aluminium, refrigerants, and steel have contributed nearly 8–8.5 per cent increase, while energy efficiency label changes have added another 4 per cent,” he explained. Although a reduction in GST offsets part of the increase, a significant portion is still being passed on to customers.

He emphasised that such a steep price hike is “unprecedented” in the AC industry, which has largely maintained stable pricing over the past three to four years.

Sud highlighted that ongoing geopolitical tensions could further disrupt supply chains, particularly affecting plastic components derived from oil-based inputs. While immediate pricing impact remains uncertain, he warned of potential medium-term cost escalations.

“The bigger concern from the war is not just pricing but raw material availability and its eventual impact on consumer sentiment,” he noted.

According to Sud, macroeconomic pressures—such as rising household expenses—could deter discretionary purchases like air conditioners. “When consumers are worried about essentials like LPG cylinders, their inclination to invest in discretionary products declines,” he said. He added that first-time buyers, who constitute nearly 60–70 per cent of AC purchasers, are particularly sensitive to absolute price increases, even if they lack historical price comparison.

Sud pointed out a divergence in demand trends across regions. Northern India has seen a stronger early pick-up in summer heat, while southern markets are yet to witness significant temperature spikes.

“The South is relatively more resilient due to higher per capita income and a preference for premium products, while the North remains more price-sensitive,” he said.

After a blockbuster year that saw industry volumes grow from 11 million units to 15 million units, Sud expects a contraction in the current financial year. “We believe industry volumes could decline by around 5 per cent this year,” he said, adding that this comes after a high base and multiple demand-side pressures.

However, he remains cautiously optimistic about the medium-term outlook, projecting a rebound with nearly 15 per cent volume growth in the next financial year, supported by stabilizing prices and demand recovery.

To mitigate the impact on consumers, companies including Blue Star are adopting a phased approach to price increases and enhancing value propositions. Measures include, staggered price hikes across the season, increased focus on value engineering to control costs, and attractive financing schemes and reduced installation charges. “These efforts are aimed at lowering the overall acquisition cost for consumers,” Sud said.

Exports contribute about 8–10 per cent of Blue Star’s total business, with the company serving over 20 international markets including the US, SAARC, and the Middle East. However, Sud stressed that the company remains heavily dependent on domestic demand.

On manufacturing, he noted that around 65 per cent of the industry’s value chain is now indigenized, a significant shift driven by government initiatives such as production-linked incentives (PLI) and import restrictions introduced in recent years.

Ultimately, Sud underlined that the trajectory of the AC industry will depend heavily on how the summer unfolds in the coming months. “Temperature remains the biggest trigger for demand, especially for first-time buyers. The next few months will be critical in determining how the season shapes up,” he said.