Blue Star Announces Potential Air-Conditioner Price Hike Amid New Norms and Rising Costs
Chennai-based Blue Star has indicated a likely increase in air-conditioner prices, driven by upcoming changes in energy-efficiency labelling norms effective January 2026 and escalating commodity costs. The company, while unveiling its new range of room air conditioners for 2026, also revealed plans for a capital expenditure of approximately Rs 200 crore, reflecting an optimistic demand outlook despite recent market challenges.
Factors Behind the Price Increase
B Thiagarajan, Managing Director of Blue Star, highlighted that commodity price surges have been unprecedented, adding about 8.5% to material costs. Additionally, the revision in energy-efficiency labels means that even comparing similar models, such as a 2025 five-star AC with a 2026 five-star unit, prices are expected to rise by at least 5%, and in some cases between 5% and 8%. Combined, these factors could push overall AC prices up by around 13% to 15%.
However, Thiagarajan noted that a 10% reduction in Goods and Services Tax (GST) partly offsets this increase. As a result, consumers may effectively pay about 5% more than last year, mitigating some of the impact from the other cost pressures.
Market Performance and Growth Projections
Thiagarajan described 2025 as a failed summer for the industry, with the current fiscal year potentially ending 5% to 7.5% lower than FY25. Despite this setback, he anticipates a strong rebound. For FY27, Blue Star projects about 25% value growth and 20% volume growth over FY25. Compared to FY26, volume growth is expected at 25% and value growth at around 30%.
In line with its strategy to gain market share, Blue Star aims for 25% volume growth and approximately 30% revenue growth in FY27. The company's current market share stands at about 14.2% to 14.3%, with a target to increase it to 14.5% to 14.75%.
Production Capacity and Capital Expenditure Plans
Blue Star's current production capacity is about 1.4 million units, scalable to 1.8 million units. To support future growth, the company plans a total capital expenditure of Rs 200 crore to Rs 210 crore. This investment includes:
- Rs 40 crore for its plant in Himachal Pradesh
- Rs 30 crore for the Sri City facility in Andhra Pradesh, primarily for automation, maintenance, and upgrades
- About Rs 70 crore allocated for research and development (R&D)
- Rs 60 crore to Rs 70 crore expected to be spent on marketing and advertising initiatives
This comprehensive capex plan underscores Blue Star's commitment to enhancing operational efficiency and driving innovation in the competitive air-conditioner market.
