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Key Points

Unseasonal rains during the peak summer months have put a damper on air conditioner sales this year. The rating agency ICRA expects volumes to decline by 10-15% in the 2025-26 financial year as a result. However, a recent cut in the GST rate for ACs is expected to stimulate demand in the coming quarters. The long-term outlook for the industry remains strong due to factors like rising temperatures and low household penetration.

Key Points: ICRA Forecasts AC Sales Dip as Extended Rains Dampen FY26 Demand

  • Extended unseasonal rains in North and Central India hit peak summer demand
  • GST rate cut to 18% from 28% may boost pre-buying before new standards
  • Long-term growth drivers include low penetration and rising urbanization
  • Industry capacity is set to expand by over 40% with Rs 5000 crore investment
  • PLI scheme aims to increase component indigenisation to 75% by 2028
3 min read

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

ICRA projects a 10-15% drop in India's AC volumes for FY26 due to unseasonal rains. A partial recovery is expected with GST cuts and warmer 2026 summer forecasts.

"Unseasonal and above-average rainfall reduced the number of heatwave days, resulting in a 15-20% drop in sales volume in April-July 2025. - Kinjal Shah, ICRA"

New Delhi, September 24

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

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Reader Comments

P
Priya S
The weather has been so unpredictable this year! In Delhi, we barely used our AC compared to last summer. The rains just wouldn't stop. Climate change is really affecting everything, even our appliance purchases.
A
Aditya G
While the short-term dip is concerning, the long-term outlook seems strong. With PLI scheme boosting local manufacturing to 70-75%, we should see better quality and competitive pricing. Make in India initiative is finally showing results in consumer durables sector.
S
Sarah B
As someone who recently moved to Mumbai from the US, I'm impressed by how the Indian government is handling manufacturing incentives. The GST reduction is a smart move to boost consumption during challenging weather conditions.
K
Karthik V
The industry needs to focus more on energy-efficient models. With electricity costs rising in most states, consumers are looking for 5-star rated ACs even if they cost more upfront. The new star label guidelines should help standardize efficiency ratings.
M
Meera T
I work in the retail sector, and we've seen this dip firsthand. Customers are postponing purchases hoping for better deals next season. The pre-buying mentioned in the article might actually happen if companies pass on the GST benefit quickly.
R
Rahul R
While the report

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