Coronavirus aftermath: Blue Star expects growth slowdown of ACs

By: |
March 14, 2020 6:30 AM

Blue Star increased the price of air conditioners in the range of 3-5% in February as the customs duty on certain components went up in the Union Budget.

Meanwhile, the company has launched a premium range of ACs catering to price sensitive customers.Meanwhile, the company has launched a premium range of ACs catering to price sensitive customers.

Air conditioner maker Blue Star expects a 5-10% correction in demand in the coming summer months as economic uncertainty accelerated by COVID-19 begins to grip India.

Traditionally, summer season is peak time for air conditioner sales as the growth touches 20% and goes up to even 25% as the temperatures soar. However, the upcoming demand season could be a damp squib. B Thiagarajan, managing director, Blue Star, said: “Demand side will be coming down as panic sets in because companies may think first quarter will be a washout, so they may defer recruitment, bonus etc which means the disposable income may come down”. He expects the growth to be in the range of 10-15% this summer. He was speaking on the sidelines of launch of new range of residential air conditioners.

So far, COVID-19 scare has impacted the company’s global supply chain, as lockdown of factories in China due to the virus scare had a cascading impact on components coming in from other countries too, given their dependence on China. Thiagarajan said that while the company is well stocked till March end to April first week, there may be a period between mid and end April where it may run out of materials. However, since the demand is also expected to be lower, the company is less worried.

Blue Star increased the price of air conditioners in the range of 3-5% in February as the customs duty on certain components went up in the Union Budget. Also, the prices were impacted due to around 65% hike in ocean freight rates with many vessels going out of the system following regulatory changes around reduction of sulphur in fuel.

Meanwhile, the company has launched a premium range of ACs catering to price sensitive customers. The range is of 3-star inverter split ACs that are available at prices starting from Rs 31,990 for a 1 tonne 3-star inverter split AC and from Rs 37,990 for a 1.5 tonne 3-star inverter split AC. The ACs come with in-built air purifier and are WiFi enabled, which makes them work through voice commands. Blue Star – which had a market share of 12.5% last year – hopes to close FY20 with 12.75% market share, 13-13.5% in FY21 and 15% in FY24.

In terms of investments, Blue Star has a deep freezer factory coming up with an investment of Rs 120 crore. Another manufacturing facility is planned for commissioning before March 2022 in SriCity in Andhra Pradesh, having an investment of Rs 125 crore in first phase. It will also increase spends on advertising this year to Rs 65 crore, which stood at Rs 55 crore last year.

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