LG India to Hold AC Prices Amidst New Energy Norms, Competitors Expect Hikes

LG India, a major player in the consumer electronics market, has strategically announced that it will not increase the prices of its air conditioners (ACs) when the new Bureau of Energy Efficiency (BEE) norms come into effect in January 2026. This move is unprecedented in the sector, as new energy efficiency rules typically lead to price adjustments.

LG India plans to absorb the additional costs associated with producing more energy-efficient ACs. This strategy is partly supported by the reduction in Goods and Services Tax (GST) on ACs, TVs, and dishwashers from 28% to 18% in September, which prompted price cuts at that time. LG's Chief Sales Officer, Sanjay Chitkara, stated that the buffer created by the GST cut allows them to maintain prices for consumers.

However, competitors have a different outlook. Haier Appliances India, through its President NS Satish, indicated that holding price lines would be difficult. He cited the need for more raw materials like copper for improved energy efficiency and the higher energy consumption of ACs compared to refrigerators, making price hikes unavoidable for five-star rated ACs. Kamal Nandi, Business Head at Godrej Appliances, suggested consumers might see two distinct product sets: existing stock with lower star ratings at lower prices, and new stock from January 2026 onwards with higher star ratings at increased prices. He also noted that companies have a three-month window (January-March 2026) to clear existing inventory, and market segmentation between price-sensitive and efficiency-focused buyers could aid this process.

The Indian AC market, estimated at 12-13 million units, experienced an 18-20% decline in the first half of FY26 due to muted demand from unseasonal rains. Projections for the second half are more optimistic, supported by the GST cut and favorable macro-economic factors. The market is highly competitive, with 10-15 players.

Impact

This development could pressure competitors to reconsider their pricing strategies or offer aggressive promotions to match LG's price stability. It may lead to a temporary advantage for LG India in terms of sales volume, especially if consumers opt for stable prices. The impact on margins for LG will depend on their cost management, while competitors might face margin pressure if they cannot pass on costs or if they offer deep discounts. The news is significant for the consumer durables sector and its investors.

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Difficult Terms

Bureau of Energy Efficiency (BEE) norms: These are government-mandated standards that set minimum energy efficiency requirements for appliances sold in India, aiming to reduce overall energy consumption.

Star ratings: A visual indicator on appliances, typically ranging from 1 to 5 stars, where a higher number of stars signifies greater energy efficiency. More stars generally mean lower electricity bills for consumers.

Goods and Services Tax (GST): A unified indirect tax system in India that replaced multiple indirect taxes. The rate varies depending on the type of good or service.

Inventories: The stock of goods that a company holds for sale or for use in production.

Unseasonal rains: Rainfall that occurs outside of its typical seasonal pattern, which can affect agricultural output and consumer demand for seasonal products like air conditioners.

Macro-economic factors: Broad economic conditions that affect an entire economy, such as inflation, interest rates, government fiscal policy, and consumer confidence.

Disposable incomes: The amount of money an individual or household has left after taxes and other mandatory charges have been deducted, which can be spent on goods and services.