West Asia Conflict Creates Supply Chain Headwinds for AC Manufacturers
Ahead of the peak summer season, which typically drives robust business for consumer durables companies, air conditioner manufacturers in India are confronting unexpected production challenges. The ongoing conflict in West Asia is beginning to disrupt supplies of essential materials, including liquefied petroleum gas (LPG) and key petrochemicals, according to industry executives.
Critical Input Materials Face Supply Constraints
LPG plays a crucial role in manufacturing processes such as brazing copper components and curing powder-coating finishes in air conditioning units. Simultaneously, petrochemicals are fundamental for producing polymers used in plastic mechanical parts of AC systems. While no major production disruption has occurred on the ground yet, industry leaders express concern that continued supply issues could pose significant challenges as the summer season approaches.
Vikas Gupta, Managing Director of Operations at PG Electroplast, which manufactures ACs and other white goods for various brands, confirmed the emerging difficulties. "We are facing certain challenges related to production," Gupta stated. "First is availability of LPG and PNG which are required for certain manufacturing processes in ACs and other product categories. Also, scarcity of petrochemicals is causing some disruption in day-to-day production. We are working with our vendors to curb wider impact."
Potential Impact on Consumers and Pricing
For consumers already anticipating higher prices for new AC stocks hitting shelves around April-May due to previous price increases, the war-led supply crunch could impose additional financial burden. The situation is further complicated by new energy efficiency norms that have already pushed AC prices up by approximately 5%, with another 8-10% increase expected due to high commodity costs, according to B Thiagarajan, Managing Director at Blue Star.
"There is apprehension within the industry about supply challenges," Thiagarajan emphasized, highlighting the vulnerability stemming from supply concentration. Approximately 88% of India's LPG imports originate from West Asia, representing about 54% of the country's total LPG demand. Sumit Pokharna, Vice President of Fundamental Research at Kotak Securities, warned, "If disruptions continue, the supply gap could be significant."
Industry Response and Adaptation Strategies
Manufacturers are actively developing contingency plans to mitigate potential production impacts. Kamal Nandi, Business Head and Executive Vice President at Godrej Enterprises Group's appliances business, noted, "Geopolitical tension in West Asia has started creating some supply-side constraints across certain input materials used in AC manufacturing." The company is collaborating with vendors to optimize procurement strategies and ensure production continuity.
Beyond limited LPG supply, Nandi pointed to meager availability of key plastic raw materials like polypropylene and polystyrene, accompanied by sharp price increases. Meanwhile, Ajay Singhania, Managing Director and CEO of Epack Durable, revealed the company is exploring alternatives for brazing copper in ACs, though this approach would likely increase production costs. While no production loss has occurred thus far, gas agencies have indicated potential challenges ahead if supply constraints persist.
Singhania added that his company is focusing on ramping up production of induction cooktops in response to surging demand for alternative appliances. With temperatures already rising in parts of India and forecasts hinting at possible El Niño conditions later this year, manufacturers like Vikas Gupta hope the conflict subsides before extended summer demand materializes.
