Indian Air Conditioner Market : Challenges and Oppurtunities

1. Air Conditioners
T
he Indian airconditioning industry is health benefits as well.
on a high growth trajectory with an Korean models, Chinese imports and ag-
overall volume growth rate of 20–25 gressive stance of Japanese players have
percent per annum. In 2010, air condition- maintained competitive pricing. This is set
er sales were `7,200 crores at 3.88 million to be rationalized with an increase of 8–10
units, up from 2.8 million units in 2009. percent. Stiffening of commodity pricing
This growth rate is expected to be main- like copper, aluminum, and steel coupled
tained in 2011 too. with high crude oil prices have increased
In fact, LG Electronics is targeting India as logistics expenses.
its largest air-conditioner market by next Growing affluent middle class population,
year, ahead of the current leader US. In robust economic growth coupled with the
2010, India contributed 18 percent to the booming retail sector will ensure that the
company’s global air conditioner revenues expectation of a 25-30 percent growth in
in 2010, while the US contribution was 2011 is a reality for this segment.
over 30 percent.
The consumer is certainly not being short- Global scenario
changed; he is at par with his global coun- While man’s desire to control the indoor
terpart. The new range of ACs are spread environment led to the invention of air con-
across window, split, multi-split, inverter ditioning systems, growth in population,
ACs, floor standing, cassette, and tower sturdy economic progress, industrializa-
ACs, albeit the split segment dominates tion, rising standards of living, afforda-
with 70 percent market share. bility of technology, and increase in com-
Star rated, energy efficient models with mercial applications have led to its rapid
superior features continue to rate high on proliferation across the globe. Hitherto a
consumer demand. Gaining from ongo- luxury proposition limited to wealthy and
ing technological advances they have been prosperous layer of the society, comfort
transformed into products that can provide conditioning is fast becoming a necessity in
62 | TV VEOPAR JOURNAL | APRIL 11 | adi-media.com | An ADI Media Publication

2. most of the nations. This metamor- for replacing old air conditioning mainly used for individual rooms
phosis has opened a completely new systems with new energy efficient (ductless split, window units, and
world of opportunities for the air models will be on the rise, thereby moveable type air conditioners) and
conditioning market. Global warm- adding to market gains. Replace- packaged air conditioners mainly
ing continues to remain a major fac- ment demand is also generated by used for light commercial applica-
tor propelling market demand, es- the consumers’ need to replace their tions and whole houses (unitary
pecially in the residential segment. existing air conditioning systems air conditioners and ductless split
Depletion of ozone layer, El Nino with quieter and more feature rich PACs) was about 73.8 million units,
effect, and global warming make up air conditioner models. a 3.7 percent decrease compared
for the primary reasons that create with 2008. China strengthened its
The global market is expected to re-
the need for air conditioning sys- leading position with a market size
cover poise and reach 78.8 million
tems. of 28.2 million units. Some 11.8 mil-
units in volume sales by 2015. As
Purchase and use of air condition- lion air conditioners were sold in the
stated by the new market research
ing systems in both residential and US, a decline of more than 20 per-
report on the global air condition-
commercial applications often goes cent compared with 2008. About 4.9
ing systems market, Asia-Pacific
hand in hand with the health of million units were sold in Europe,
continues to be the largest regional
economy in a given country or re- marking a 37.4 percent decrease
market. Growth in Asia-Pacific is
gion. For instance, an increase in over 2008. In Japan, 7.4 million
fuelled by factors such as rise in ur-
per capita income pushes up con- units were sold, down 13.9 percent
ban population, cushioned impact
sumer demand for comfort living over 2008. Sales in Asian countries
of the global recession on regional
and eventually drives demand for not including China and Japan came
economies, favorable job market,
high-value products such as air to some 9.9 million units, almost the
and resulting high income levels,
conditioning systems, while con- same as 2008.
increased household gains and ris-
versely in periods of slowdown, de- ing per capita incomes in countries By product, the room air condi-
mand recedes rapidly as consumers such as China and India. tioning systems market has been
quickly axe their spending on high- the largest market segment for air
However, other regions will have conditioning systems. Low-cost fea-
priced products. Illustrative of this
modest growth. US demand for ture and ease of installation and
trend is the pal of gloom set over
HVAC equipment is expected to rise maintenance adds to the attraction
worldwide air conditioning systems
over 7 percent a year through 2014. of room air conditioners, driving
markets against the backdrop of
Gains will result from recovery in its increased sales. Reciprocating
the recent economic recession. The
residential building construction compressors continue to disappear
economic recession and subsequent
expenditures, which plummeted in from the majority of markets, with
trends such as job uncertainty, cut-
2009 due to the economic recession. the trend moving towards scroll and
backs in employee salaries, and un-
In Western Europe, mini-split room screw compressors.
employment has left many comfort
air-conditioners will post solid gains
and luxury product markets across Although the fixed-frequency air-
due to the lack of ductwork in most
the globe in a state of turmoil, and conditioning dominates the segment,
European homes. Advances in other
the air conditioning market, given inverter air conditioners are bound
developed areas, such as Canada
the product’s status as a discretion- to become the future mainstream.
and Japan, will be minimal, reflect-
ary item, especially in developing Inverter air conditioner energy sav-
ing high penetration rates and mod-
countries, is no exception to this ing advantages is obvious. The for-
est construction gains.
trend. However, hope in the form eign penetration rate of these is as
of government driven focus on en- There was an 11 percent decline in high as in Japan upto 97 percent,
ergy efficiency injects optimism the Middle East region in particu- France 90 percent, Spain 45 percent,
among air conditioner manufactur- lar. Iran and Saudi were the only and Italy 40 percent.
ers, as it promises to drive demand growth areas in the region, as the
Key players in this marketplace in-
for energy efficient air conditioning recession made its impact felt, but
clude Airwell Group, Carrier Corpo-
systems such as inverter based air at a less significant scale, outside
ration, Daikin Industries, De’Longhi
conditioners in the upcoming years. Dubai. Due to the nature of construc-
SpA, Electrolux AB, GD Midea Hold-
Another major factor, which is ex- tion and the use of district cooling in
ing Co., Ltd, GE Appliances & Light-
pected to steer the market in the many parts of the region, there is a
ing, Goodman Manufacturing Com-
next few years is the rapidly grow- strong emphasis on larger-capacity
pany, L.P., Haier Group, Hisense
ing replacement need, particularly chillers above 500 kW.
Group, Hitachi, Lennox Industries
in mature markets such as the US Detailed global sales data for 2010 Inc., LG Electronics Inc., Mitsubishi
and Europe. Given the growing focus is not available. In 2009, the global Electric, Nordyne Inc., Panasonic
on energy conservation, the demand market for room air conditioners Corporation, Rheem Manufactur-
An ADI Media Publication | adi-media.com | APRIL 11 | TV VEOPAR JOURNAL | 63

3. ing Company, Samsung Electronics Go Green businesses, and the media.
Corp., Sanden Corporation, Sharp By advertising their green drives,
With various governments imple-
Corporation, Toshiba Carrier Corpo- companies can also set themselves
menting national or regional ini-
ration, Trane Inc., Whirlpool Corpo- apart in their markets. A proper
tiatives and programs to encourage
ration, and York International Cor- policy framework and enforcements
energy conservation activities, the
poration among others. on green efforts and initiatives could
green trend is taking off in a big
way in the Asia Pacific. The govern- also give a huge boost to the mar-
Refrigerants ket.
ments’ endeavors offer tremendous
On January 1, 2010, we witnessed opportunities to technologists in the “The HVAC segment has been using
the largest and most dramatic green and energy efficiency space. advanced technology that allow air
change to the air conditioning in- The market is likely to register conditioners to intelligently lower
dustry that affects every one of us more than 10 percent growth annu- power levels once the ideal ambient
on this planet. Backed by the Envi- ally until 2015 due to the increasing temperature is reached, which, in
ronmental Protection Agency (EPA), price of conventional energy. turn, lowers users’ electricity bills,”
the US Government and 190 coun-
The Green Building trend is break- notes Leong. “In the BAS sector,
tries world-wide, January 1 marked
ing out of the confines of the Japa- building owners and facility manag-
the beginning of the phase out of hy-
nese market and is gaining currency ers are provided with a web-based
drochloroflurocarbons.
in many other countries in the Asia BAS that unifies diverse equipment
Hydrochlorofluorocarbons, or HCFC Pacific. Despite green technologies’ systems and control devices into a
such as R-22, are chemicals that are high costs, consumers are increas- single, easy-to-navigate website.”
mainly used as refrigerants in the ingly basing their purchase deci-
air conditioning industry. Releases sions on the product’s environment Latest developments
of HCFC’s damage the ozone layer, friendliness and their ability to re-
which shields the Earth from harm- The US Department of Energy’s Na-
duce energy costs and carbon foot- tional Renewable Energy Laboratory
ful ultraviolent radiation. In addi- prints.
tion, HCFC is a greenhouse gas and has invented a new air conditioning
when manufactured, results in a In fact, this enhanced environmen- process with the potential of using
by-product that contributes signifi- tal consciousness among consum- 50 percent to 90 percent less energy
cantly to global warming. By coming ers is compelling companies and than today’s top-of-the-line units. It
together, the impact of this phase industries to become more respon- uses membranes, evaporative cool-
out will include repairing the ozone sible corporate citizens and invest ing, and liquid desiccants in a way
layer and reducing the incidents of in green HVAC, BAS, and lighting that has never been done before in
skin cancer and cataracts. systems. Even the businesses and the centuries-old science of remov-
building owners that deem these ing heat from the air.
Because R-22 has been the refrig- technologies too expensive to install
erant of choice for residential air The idea is to revolutionize cooling,
and maintain can be persuaded with
conditioning systems for over four while removing millions of metric
a demonstration of the technology’s
decades, a great number of hom- tons of carbon from the air.
long-term returns on investment.
eowners may be made aware of this Hot and humid climates are tricky.
phase out. There are no legal re- “Green HVAC, BAS, and lighting
Evaporative coolers are a lower-cost
quirements to stop using HCFC in technologies can greatly improve the
alternative to airconditioning in dry
the existing air conditioner or other bottom line of the business, provided
climates that do not get too hot or
equipment and there is a lengthy that they are applied properly,” says
humid. Water flows over a mesh,
phase out period which does provide Frost & Sullivan Consultant Melvin
and a fan blows air through the wet
time to switch to ozone-friendly re- Leong. “They generate financial ben-
mesh to create humid, cool air.
frigerants. However, homeowners efits through energy efficiency, ener-
gy and water savings, reduced wast- In humid climes, adding water to the
should be aware that supplies of
age, improved indoor environmental air creates a hot and sticky building
HCFC that run the air condition-
quality, greater employee comfort or environment. Furthermore, the air
ing system will be limited due to
productivity, as well as lower opera- cannot absorb enough water to be-
the phase out, causing prices to
tions and maintenance costs.” come cold.
rise. Additionally, starting in 2020,
there will be a ban on the produc- These benefits have to be conveyed In hot places, the evaporative cooler
tion of HCFC, so consumers will using effective promotion, educa- can bring down the temperature,
need to rely solely on the recycled tion, and public awareness programs but not enough to make it pleas-
or reclaimed quantities to service through collaborations with all par- ant inside on a 100-degree day or
any system that is in operation af- ties such as the government, non- during the four to eight week mon-
ter this date. government organizations (NGOs), soon season. The cooling bumps up
64 | TV VEOPAR JOURNAL | APRIL 11 | adi-media.com | An ADI Media Publication

4. against the wet bulb temperature, knew of its potential, but opted to to 90 percent less energy than top-
the lowest temperature to which air go the refrigeration route. of-the-line refrigeration-based air
can be cooled by evaporating with- Most people know of desiccants as conditioning.
out changing the pressure. The wet the pebble-sized handfuls that come Because DEVap uses salt solutions
bulb temperature could be 75 or 80 with new shoes to keep them dry. rather than refrigerants, there are
degrees on a mid-summer day. Typi-
The kind NREL uses are syrupy liq- no harmful chlorofluorocarbons
cally, evaporative coolers only can
uids – highly concentrated aqueous (CFCs) or hydrochlorofluorocarbons
bring the temperatures about 85
salt solutions of lithium chloride or (HCFCs) to worry about. A pound of
percent of the way to the wet bulb
calcium chloride. They have a high CFC or HCFC in refrigerant-based
level.
affinity for water vapor, and can ACs contributes as much to global
So, for most of the country, refriger- warming as 2,000 pounds of car-
thus create very dry air.
ation-based air conditioning is the bon dioxide. A typical residential
preferred way of keeping cool. Because of the complexity of des- size AC has as much as 13 pounds
iccant cooling systems, they have of these refrigerants. The release of
Cooling requires temperature drop
traditionally only been used in in- this much refrigerant is equivalent
and less moisture. Cooling comes in
dustrial drying processes. Inventing to burning more than 1,300 gallons
two forms - sensible cooling, which
a device simple enough for easy in- of gasoline, or driving over 60,000
is a temperature drop, and latent
stallation and maintenance is what miles in a 2010 Toyota Prius. That’s
cooling, which comes from pulling
has impaired desiccant cooling from based on the Environmental Protec-
the moisture out of the air.
entering into commercial and resi- tion Agency’s fuel efficiency rating
One intriguing product already on dential cooling markets.
the market in arid, temperate cli- for the 2010 Toyota Prius and on the
mates is the Coolerado cooler. It dif- To solve that problem, the NREL standard of 19.5 pounds of carbon
fers from a typical evaporative cool- device uses thin membranes that dioxide for every gallon of gasoline
er by never increasing the moisture simplify the process of integrating burned.
content of the supply air. It provides air flow, desiccants, and evapora-
Traditional air conditioners use a lot
cool air through indirect evaporative tive cooling. These result in an air
of electricity to run the refrigeration
cooling. Indirect evaporative systems conditioning system that provides
cycle, but DEVap replaces that re-
use a purge air stream that removes superior comfort and humidity con-
frigeration cycle with an absorption
heat from the product or supply air trol.
cycle that is thermally activated. It
stream that is then directed into a The membranes in the DEVap A/C can be powered by natural gas or so-
building. That way, the Coolerado are hydrophobic, which means wa- lar energy and uses very little elec-
can cool the air all the way to the ter tends to bead up rather than tricity.
wet-bulb temperature. soak through the membranes.
This means that DEVap could be-
It is a big improvement on evapora- Imagine rain falling on a freshly
come the most energy efficient way
tive cooling because it does not add waxed car. That property allows
to cool your house in any climate.
moisture and still gives cold air. the membranes to control the liquid
However, in a humid climate, it still flows within the cooling core. It’s NREL has patented the DEVap con-
does not provide cold air or humidity that property that keeps the water cept, and NREL expects that over
control. and the desiccant separated from the next couple of years they will
the air stream. be working on making the device
DEVap: Liquid Desiccants, Perme-
The water and liquid desiccant are smaller and simpler and perfecting
able Membranes. The DEVap solves
brought into DEVap’s heat-mass the heat transfer to make DEVap
that problem. It relies on the desic-
exchanger core. The desiccant and more cost effective.
cants’ capacity to create dry air us-
ing heat and evaporative coolers’ evaporative cooling effect work to- Eventually, NREL will license the
capacity to take dry air and make gether and create cold-dry air. technology to industry, “We’re never
cold air. The air is cooled and dried from a going to be in the air conditioner
By no means is the concept novel, hot-humid condition to a cold and manufacturing business,” said Ron
the idea of combining the two. But dry condition all in one step. This Judkoff, Principle Program Manag-
no one has been able to come up all happens in a fraction of a second er for Building Energy Research at
with a practical and cost-effective as air flows through the DEVap air NREL. “But we’d like to work with
way to do it. HVAC engineers have conditioner. The result is an air con- manufacturers to bring DEVap to
known for decades the value of des- ditioner that controls both thermal market and create a more efficient
iccants to air conditioning. In fact, and humidity loads. and environmentally benign air con-
one of the pioneers of early aircon- ditioning product.”
DEVap helps the environment in
ditioning, Willis Haviland Carrier, many ways. DEVap uses 50 percent Research conducted in March 2011
An ADI Media Publication | adi-media.com | APRIL 11 | TV VEOPAR JOURNAL | 65