India is one the fastest growing markets for air conditioning. With growth of the economy, the market for air conditioning is assuming bigger proportions. While demand from residential segment remains, it is the commercial segment that is fast catching up. An exclusive OEM Update report.
During 2009-10 the total market for air conditioning in India is estimated at Rs. 12,000 crores. Of this market for central air conditioning including central plants, packaged air conditioners and VRF systems is Rs. 7,000 crore and for room air conditioners Rs. 5,000 crore. The market can also be segmented based on the end users. The market for air conditioning catering to corporate and commercial customers amounted to Rs. 9, 000 crore and residential customers Rs. 3, 000 crore. Assuming that the average GDP growth will be 8 percent over five years as per the industry estimates, one can expect the air conditioning industry to grow at a CAGR of 25 percent per annum.
However, despite demand fundamentals being quite strong, penetration levels are modest both in residential and commercial sector. As per the industry estimates, the penetration level in residential segment is two percent and commercial segment is around 7 percent. In China, the penetration levels for both the segments are higher than 30 percent, whereas in US the penetration level is more than 80 percent. However, with the GDP growth in India on fast track, in next ten years India will witness high growth of all types of air conditioners. This would include: central plants, packaged air conditioners, variable refrigerant flow systems (VRF’s) and split and window air conditioners. Sizeable demand in the former category apart from window and split air conditioners would be from the commercial sector.
Commercial Demand Area
Commercial sector that would cater to the demand would include, large commercial establishments, such as offices, information technology and information technology enabled industry, hospitality industry, retail, hospitals, telecom and data centers. Cinema theaters and multiplexes would also be major demand area. However, one of the new commercial areas that would be demand drivers for air conditioners would be upcoming greenfield airports and airports undergoing modernization by the government. This is both consisting major and non major air ports. Government has recently announced the modernization of Chennai and Kolkata airports. It is in the process of modernizing 35 non major airports. The airports modernization programme is in various stages of implementation by the government. Utility driven infrastructure sectors would be a big demand driver for air conditioners.
Growth Avenues
Also in the commercial segment a major demand driving area would be the commercial real estate projects. This would be precisely from green buildings. However, air conditioners required from green buildings has to be technically qualified to minimize energy requirements. This is as because there is a holistic initiation by project developers and users to minimize energy costs. As per real estate industry estimates, against a modest 20,000 sq.ft of green built up area in the country during 2003, today more than 490 green buildings with a built up area of over 340 million sq.ft are being constructed in the country. Most of the establishments would be in the commercial segment. Special Economic Zones will also fall into the category of green buildings and a major demand area.
In India there, the population growth rate is expected at 1.3 percent while the energy consumption is expected to grow at 4.3 percent (there is already a peak power shortage of 13 percent). This trend would strain the energy sector to a larger extent. Commercial buildings are one of the major consumers of energy, ranking third after industry and agriculture. Buildings consume more than 20 percent of energy used in India. Air conditioning typically accounts for 35 percent of energy in commercial buildings.
In light of this, adopting energy efficient air conditioning systems is the need of the hour. The tools and techniques will go a long way in enhancing energy efficiency. The energy efficiency potential of all energy efficient air conditioning equipments in green buildings is 30-40 percent more than the conventional building. To fit into this demand requirement, there has to be sustained research and development on part of air conditioners manufacturers to adapt to the local climatic conditions and regional practices for various building types.
It is estimated that the market potential of energy efficient heating, ventilation and air conditioning equipment would be about US$ 1billion by the 2012 and the over all market potential for green building products and technologies is over US$ 40 billion.
Of late, with increased awareness of the importance to go green, stake holders are demanding HVAC equipment in which special emphasis is being laid on air conditioning. This has further triggered market of energy efficient air conditioners. On the other hand with the spread of the movement, indoor air quality in a building which goes hand in hand with energy efficient equipment is given due importance and is appropriately addressed. This has resulted in addressing the indoor air quality and its impact on human health and well-being.
Maintenance Aspect
Demand of air conditioners is poised to grow. This would be led by demand requirement from the commercial sector. However, to have optimum equipment availability there has to be requisite service and maintenance support from equipment manufacturers. Unlike other appliance air conditioners requires periodic maintenance and service. The market size for air conditioning service is expected to be at the range of Rs. 1,500 crore. The industry is dominated by unorganized players. In the coming years the organized industry is expected to play a major role with many value added services like energy management, performance contracting, and indoor quality improvement in addition to the conventional service product such as annual maintenance contract, repair service and spare parts. Like many other industries, the Indian air conditioning industry is poised for rapid growth in the coming years.
Green buildings for commercial segment as well as green homes will become popular. Being a major consumer of power, energy demand will go up and call for more investments in power infrastructure. New air conditioning products using non conventional energy sources will be introduced. However, challenge for the growth of the air conditioning industry would be availability of power at reasonable cost, energy efficiency and issues pertaining to carbon emission cuts. Technology and green building related issues, specifically on refrigerants and ozone depletion. Availability of trained manpower for installation and servicing of equipment would require to be addressed in an enhanced way.
