Prices of premium, energy efficient inverter ACs have crashed by up to 25% as LG Electronics seeks to set competitive benchmarks beyond the bailiwick of conventional machines, a segment the Korean giant exited this year. LG has significantly cut prices to drive sales, forcing other brands to make regular ACs cheaper. Price are lower despite an increase of up to 15% in costs of Chinese-imported components such as compressors and indoor units, with all brands compelled to absorb rising input costs. The impact of LG’s price leadership has meant that ACs this season are cheaper than they were two years ago, with the usually costlier inverter ACs selling at prices lower than those of five-star split air conditioner models of 2016. India’s ?20,000 crore AC market is expected to increase 12- 15% this year due to early onset of summer and lower prices. Until last year, around 65% sales came from fixed speed split ACs, 20% from window and the balance 15% from inverter ACs. This year, the industry believes share of inverter air-conditioner will almost double. “Since we vacated the fixed speed AC segment, we got the scale of manufacturing and operations that allowed us to cut prices of the inverter AC,“ said LG Electronics India business head (AC) Vijay Babu. “At present, our inverter line-up is priced 12-15% higher than the usual split AC range of competitors,compared with 25-30% six months ago. As volumes pick up, we expect this price difference will even out next year,“ he added. LG’s current inverter 1.5 TR AC is priced around ?46,000 this year, compared with ?51,000 last year. A similar capacity 5 star regular split AC is priced around ?39,000-42,000. However, the smaller brands and online-exclusive manufacturers have cut prices further, selling a unit anywhere between ?32,000 and 36,000. Voltas president Pradeep Bakshi said that the company is managing cost and pricing pressures by value-engineering. He said the brand will ensure competitive pricing so that it can gain market share. Godrej Appliances business head Kamal Nandi said brands are adopting newer strategies to fight the price erosion in air conditioners by focusing on energy efficiency of the models. However, a rise in prices is inevitable and would depend on the component stock of the brands and the market scenario, he said.

(Source: ET Bureau, March 11, 2017)