AC sales take hit as extended rains dampen demand, volumes may dip 10-15% in FY26: ICRA

New Delhi [India], September 24 (ANI): Room air condition sales volume are expected to decline 10-15 per cent in 2025-26 in India, with extended rainfall experienced during the peak demand season, according to a report by rating agency ICRA.
Indian room air-conditioner (RAC) industry volumes are expected at 11.0-11.5 million units in 2025-26, from a record 12.5-13.0 million units in 2024-25.
Demands for room ACs were hit due to an extended period of unseasonal rains seen during the peak demand season of April-July in North and Central India.
However, according to the rating agency, a partial recovery is expected in the second half of 2025-26, especially from southern and western regions, driven by forecasts of a warmer summer in 2026.
Moreover, ICRA projects the reduction in the goods and services tax (GST) rate to more than offset the price rise related to the implementation of the new Star label guidelines in January 2026, boosting pre-buying in the next quarter.
During the recent GST rationalization, electronic appliances, including ACs, which had long remained in the highest tax slab, have now been brought down to a more reasonable level.
Air conditioners now attract 18 per cent GST instead of the earlier 28 per cent.
ICRA said that the AC industry's long-term resilience remains underpinned by strong growth drivers--rising temperatures, low household penetration, urbanisation, and growing replacement demand from the steady shift towards energy efficient models.
As a result, capacity is expected to increase by over 40-50% in the next two years from 24-26 million units at present, with capital expenditure of Rs 4,500-5,000 crore planned in the next two-three years.
The Government of India's (GoI's) production-linked incentive (PLI) scheme for components manufacturing for the consumer durable industry is set to boost indigensiation in the Indian room AC industry to 70-75% by 2027-28 from the current 50-60%.
Kinjal Shah, Senior Vice President and Co-Group Head, ICRA, said, "ICRA projects volume sales to decline to 11.0-11.5 million units in FY2026 from a record 12.5-13.0 million units in FY2025, reflecting the subdued demand during the peak summer season (April-July)."
"Unseasonal and above-average rainfall reduced the number of heatwave days, resulting in a 15-20% drop in sales volume in April-July 2025--particularly in North and Central India, compared to a robust 40-50% growth in the same period of the previous year. The inherent vulnerability to climate change and unpredictable weather patterns that the industry faces, will thus play out this year," Kinjal Shah added. (ANI)