Washing Machines and Air Conditioners

The washing machine segment is basically divided into two categories: Semi Automatic (SA) and Fully Automatic (FA). The SA was the first one to be introduced in India and comprises 80 percent of the market with FA occupying the rest. Fully automatic ones cost more than Rs 10,000 over the SA ones and they require continuous supply of water –which of course is a scarce commodity in many Indian cities. The twin tub machines therefore are more popular and purchased by first time users. Of late the single tub semi automatic ones have also come into the market (thanks to Samsung). The market can also be segmented into top load (TL) with TL comprising 95 per cent of the industry while FL constituting just five per cent. On the basis of capacities the market can be put into three segments less than 4 Kg category (5 percent of market); 4-5 Kg (50 per cent) above 5kg (15 per cent). In the SA segment consumers preference is shifting from the smaller size segments (3.5 – 5kg) to the larger size segments (6kg) Region wise, West and South is a major market for FA while north is for SA. About 40-50 per cent of the sales are from the top 10 metros.

The washing machine had a dream run till 1998 growing at a CAGR of over 20 percent between 1993–1998. The sales growth has not been impressive thereafter. Prices too have remained stagnant, a number of factors especially the scarcity of water, availability of cheap labor buyers’ preference for other essential household items etc., have contributed to this negative trend. The competition rose, meanwhile with the entry of MNCs. Existing players lie Videocon expanded their capacity levels. The resultant pricing pressures had a telling effect on the bottom line of most players. In the SA segment, Videocon, LG, and Whirlpool are fighting for the top honor followed by BPL, Samsung, National, IFB, Godrej etc. In the FA category Whirlpool, Videocon, BPL, LG and Samsung are fighting it out for a respectable share of the market. In the front loading category IFB is the market leader with 70 per cent market share followed by LG. With low penetration levels (just 13 percent in urban areas, 0.7 percent in rural areas as against 48 per cent penetration level in China) the matching machine segment should see lot of action in the years ahead. New models new technologies innovative campaigns talking about fuzzy logic, washy talky etc. this segment should generate lot of interest also in the majority for urban households in future.

Air conditioning products can be segmented into non-ducted and ducted. The non ducted products are further divided into two parts: Windows ACs (WAC) and the mini spilt ACs (SAG). The demand for non-ducted AC comes from households and corporates. The ducted system is divided into central plants packaged ACs (PAC) and ducted splits. The demand for ducted systems is from industrial houses. WAC accounts for 80 percent of the room air conditioning (RAC) market while SAC accounts for about 20 percent.

On the basis of capacity the market can be divided into 0.75 tonne, 1 tonne, 1.5 tonne and 2 tonne and above. Of these 1.5 tonne capacity accounts for more than 70 percent of that WAC market. With rising demand from the household segment the ratio of 1.0 tonne and lower capacity air conditioners is increasing and is currently estimated to be at 25 per cent.

The air conditioning market is witnessing a healthy growth of over 20 per cent during the last couple of years. The total air conditioning industry is estimated to be around Rs 3,000 of this non ducted products size would be Rs 1800 crore and the ducted products share would be Rs 1200 crore.

Prior to 1997 the institutional demand for ACs was the major growth driver in the air conditioning industry (corporation institutes government together accounting for over 90 percent of the buying). During the last 7-8 years the demand from the home segment has picked up quite significantly (30-35 percent). AC is no longer treated as a luxury in urban areas where the household incomes, too have risen, better distribution network, large scale advertising attractive financing schemes have all helped the WAC segment to grow at a respectable pace.

Source: Strategic Management

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