A scorching heatwave drove record sales of refrigerators and air conditioners for the Indian arm of Panasonic Holdings Corp. in April. However, the company anticipates the surge may not last due to overwhelming demand and a shortage of components.
![Manish Sharma](https://themachinemaker.com/wp-content/uploads/2024/05/Manish-Sharma.jpg)
“Summer this year is severe, and we’re seeing an unforeseen demand for cooling products,” Manish Sharma, chairman of Panasonic Life Solutions India Pvt Ltd. Panasonic Life may not be alone in this predicament. The industry appears to have been caught off guard by the sudden spike, with peers such as Voltas Ltd. and Blue Star Ltd. echoing similar sentiments.
The growth has surpassed 70-75% over the last two or three months, a figure deemed “unprecedented” by Pradeep Bakshi, managing director of Voltas Ltd. He noted that even the most astute planners could not have foreseen such exponential growth. B Thiagarajan, managing director of Blue Star, also acknowledged an 80-90% growth in AC sales in April, resulting in shortages in some regions.
Component supplies have a lead time of almost 60 days. Also, procuring supplies has become difficult amid import restrictions, executives said. However, Panasonic Life’s Sharma said the production-linked incentive scheme for air-conditioners, aimed at promoting self-sufficiency, has helped manufacturers slightly reduce their reliance on China and other overseas markets. “The contribution of local sourcing has doubled in just 18 months from a mere 20% and the goal is to reach 75% by FY28.”
The Rs 11,000-crore company targets to grow “significantly” ahead of the industry. “We expect the head start in terms of demand to continue and the AC industry would deliver 18-20% by the end of FY25… and we should also gain market share and grow more than the industry,” Sharma said.
He also sees a major opportunity to expand exports. “The logistics cost as well as the supply chain efficiencies that India can enable compared to our southeast Asian counterparts would give us an advantage with rising economies of scale, even though currently there is some amount of disability on the cost front,” according to Sharma.
The government also intends to make India crucial to global supply chains by offering its manufacturing capabilities in electronics as an alternative to China. “There has been a methodical approach to boost exports to enable our global competitiveness,” he said. Panasonic has already made “humble beginnings” in exports, which contribute about 8-9% to top line, said Sharma. “We’re exporting ACs and refrigerators to Bangladesh, Sri Lanka, Middle East and Africa.”
Over the past five years, Panasonic Life invested about Rs 390 crore towards manufacturing and an additional Rs 290 crore for setting up an innovation centre in Bengaluru. Sharma said the company plans to continue making similar investments over the next 3-5 years. Panasonic’s local businesses, that spans six segments such as home appliances, switches, cables and wires, account for 2% of the brand’s global sales.
“Though our contribution to revenue is still small, India sits on the top in terms of the pecking order of importance globally, and I believe we will be the engine for growth for the world in the decades to come,” Sharma said.