New Delhi [India], March 25 (ANI): Indian air conditioner manufacturers are facing a significant production hurdle as a tightening supply of Liquefied Petroleum Gas (LPG) disrupts key manufacturing processes across the country. Ongoing geopolitical tensions and supply chain bottlenecks have led the government to prioritize household LPG consumption, leaving commercial users and Electronic Manufacturing Services (EMS) firms grappling with a shrinking pool of available fuel. This shortage is hitting the consumer durables sector at a critical time as the industry prepares for peak summer demand, according to a Nuvama report.
Manufacturers rely heavily on LPG for heat exchanger brazing, a process widely considered the most efficient method for building air conditioning units. According to the report, the disruption is particularly severe for firms that cannot easily pivot to other energy sources. Major industry players have transitioned to using oxy-acetylene for brazing to keep assembly lines moving. However, this shift comes with its own set of vulnerabilities. Oxy-acetylene production depends on crude-linked feedstock or limestone, both of which are heavily import-dependent. The report highlights that 94 percent of India’s limestone imports originate from the Middle East, making this alternative fuel sensitive to global trade fluctuations and further supply risks.
These fuel challenges coincide with a broader array of headwinds for the cooling industry. After a lackluster summer in 2025, firms are now dealing with unseasonal rains in northern India that have softened consumer momentum in recent weeks. To combat rising input costs, brands have implemented price hikes ranging from 5 to 10 percent at the consumer level. The report notes that “oxy-acetylene is aiding continuity in production temporarily, albeit at higher costs.”
The financial strain is evident as LG Electronics India (LGEIL) announced a “10% price hike for RACs across all SKUs and 5% across other categories.” This move follows a previous price increase of approximately 9 to 10 percent for room air conditioners since January 2026.
Financial pressures continue to mount due to the depreciation of the Indian rupee and the transition to new star rating regulations, which are increasing compliance costs. The report suggests that the combination of cost inflation and rating-related changes requires total price hikes between 8 and 14 percent. While brands are expected to post modest revenue growth in the fourth quarter of fiscal year 2026, EMS players face significant challenges regarding both revenue and margins.
“Nonetheless, we believe brands are likely to post modest revenue growth in Q4FY26 with decent margins, while EMS players could face challenges on both fronts,” the report noted. (ANI)
About The Author
