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OEM Update

Airconditioning Industry Enormous Growth Opportunities

August 16, 2010 8:35 am

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.
 

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