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Summary
As Indian consumer durables face a tough market, the much-anticipated GST cuts have failed to deliver the expected sales boost. Major companies like LG and Bluestar report significant profit declines, raising concerns about demand recovery.
Leading Indian companies selling electronic products from air-conditioners to fans and refrigerators had expected a major boost from the GST cuts in September. While a shorter festival season and longer winter due to La Nina effects were known in advance, some policy and external factors came out of the blue to play spoilsport. According to Bluestar managing director B. Thiagarajan, the December quarter was a quarter to forget. Mint explains what unfolded in the consumer durables sector during the quarter.
What was the GST rate change for consumer durables?
Consumer durables like smart TVs, smart refrigerators, air-conditioners and washing machines were moved to 18% GST from the earlier 28%. Mobile phones and laptops continued to be taxed at 18%, unchanged from earlier rates. This led to subdued buying in Q2 as customers waited for GST cuts to take effect in September. Analysts at JM Financial predicted in September that the price reduction could translate into 9-10% additional volume growth for air-conditioners. As the segment is fiercely competitive, most sellers passed the benefit on to customers.
How did consumer durables makers fare in Q3?
Listed AC makers reported a difficult quarter. Newly listed LG India reported a 61% drop in profit, while Bluestar posted a 38.6% fall in profit and Voltas a 35% fall. Lloyd Consumer, owned by listed Havells India which also sells ACs, saw a 5.6% decline in revenue in the quarter. Both Crompton Greaves and Whirlpool India reported lower profits, while Bajaj Electricals reported a loss. Companies note that demand has not picked up. According to Thiagarajan, the reason is that FMCG-related demand has not bounced back. "We thought with the substantial reduction in GST for food and processed food products, there should be huge demand growth, and at least, we have not seen till now that part reviving,” he said, pointing to the slow uptick from ice-cream and quick service restaurant segments.
What is driving up product prices?
Prices of cooling appliances such as room ACs and refrigerators rose 5-10% from 1 January as the new revised star rating from the Bureau of Energy Efficiency (BEE) came into force. Older 2025 models will appear less efficient under the new 2026 metrics, meaning a unit rated 5-star in 2025 may be reclassified as 4-star, and a 4-star as 3-star. Managements acknowledged price hikes due to rupee depreciation. Additionally, copper prices hit new highs, after rising about 60% in the past 12 months. Copper is indispensable in cooling and heating systems because of its superior heat-transfer properties.
Did a harsh winter depress demand?
India experienced a longer winter this year, coupled with the effects of La Nina. While ACs were once a summer-focused product, the market has evolved. “The one thing that has changed is that there's a category of all-season ACs, that have built-in features of heating as well, particularly in North India,” said Ankur Bisen, senior partner at The Knowledge Company. The concentration of sales around summer has reduced, and consumers are waiting to buy in the off-season and during inventory clearance season to get the best offers, according to Bisen. Promotional expenses also run high. Ebitda margins remained stable for most players. However, LG’s margins dropped to 4.8% in the quarter from 7.8% in Q3 of FY25. The new labour codes also added to corporate expenses.
What is the outlook for Q4?
Analysts at Smifs, a brokerage, noted aggressive discounting across major e-commerce platforms, reflecting a strong push to stimulate sales amid weak demand. Voltas predicts an uptick from February as summer begins in southern states like Kerala and Tamil Nadu. Bluestar also estimates a strong Q4 and maintains its current margin levels. LG management expects a strong Q4, which brings approximately 28% of its annual revenue, as the portfolio has already shown signs of revival. India’s domestic room AC manufacturing capacity, in 2025 at 24–26 million units annually, is projected to grow to 30–32 million units by CY2027, according to credit rating agency Icra Ltd. Bajaj Electricals also expects things to normalize in the fourth quarter and across FY27.
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