Air conditioner market triples in five years

Highlight

• Today, the sales figure has jumped to over 6.5 lakh units a year. This surge has given rise to a Tk4,000 crore market, excluding another Tk1,000 crore from the commercial segment, catering to bigger, industrial cooling systems

Not too long ago, air conditioners were seen as a luxury only the wealthy could afford. But things are changing fast. For Bangladesh's growing middle and affluent class, especially during the sweltering summer months, Air conditioners (ACs) are quickly becoming a household essential.

In just five years, the demand for air conditioners has nearly tripled. As more families experience a rise in income, they're prioritising comfort and convenience at home.

Before the pandemic, annual sales of ACs hovered between 2 to 2.5 lakh units. Today, that number has jumped to over 6.5 lakh units a year. This surge has given rise to a Tk4,000 crore market, excluding another Tk1,000 crore from the commercial segment catering to bigger, industrial cooling systems—according to Md Tanvir Rahman, chief business officer of ACs at Walton Hi-Tech Industries.

A big part of this boom is thanks to the local manufacturing of inverter ACs. These are not only more energy-efficient, cutting electricity use by half, but also more affordable, thanks to reduced import duties and increasing local production.

Back in the early 2000s, buying a 1.5-ton AC could cost a young executive nearly six months of salary. Today, that same AC might cost just three months' pay. That shift has made cooling down in summer a lot more accessible for many families.

Back in 2017-18, Bangladesh relied heavily on imported air conditioners—about 80% of all ACs came from abroad. But things have turned around. Today, around 90% of ACs sold are made right here at home, according to Tanvir Rahman of Walton Hi-Tech Industries.

And it's easy to see why demand is growing. "Who doesn't want to give their family a bit of comfort?" Tanvir says. "Once a customer gets an AC for one room, it's only a matter of time before they buy a second for another room—usually right after finishing the last instalment."

In a highly competitive market, flexible payment options have played a big role. Monthly instalment plans, including credit card payments stretched over 24 months, have made it easier for middle-class families to afford what used to be a luxury. On top of cooling relief, ACs also offer protection against rising air pollution—another reason they're gaining popularity.

Industry insiders say about half of all ACs are now sold on instalment plans.

When it comes to size, 1.5-ton units are the most popular, making up 55% of total sales. Smaller one-ton units account for a little over 25%, while larger ones make up the remaining 15–20%.

Of course, challenges remain. The economy has slowed down, inflation and interest rates are high, and all of that could impact AC sales this year. But Tanvir remains optimistic. "There's still a huge untapped market," he says.

Bangladesh has more than 4 crore families, including roughly 3.5 crore people in the growing middle and affluent class. Yet, only 2.28% of households currently have an air conditioner. For comparison, household AC penetration is around 5% in India, 9% in Indonesia, and as high as 16% in Brazil and Mexico.

And considering how hot it gets here, there's no doubt the potential for ACs in Bangladesh is sky-high.

With a 21% compound annual growth rate over the past five-six years, Rahman expects to see a billion-dollar AC market in Bangladesh in the next few years.

Gree and Walton together, with almost equal market share, hold around 55% in the household segment. Midea, Haier, Singer, LG, Marcel, Vision, Orion, My One, Samsung, General, Panasonic are among the other popular brands in Bangladesh.

Having more than 16% annual average growth for the past five years, the commercial large AC segment is also expanding at a moderate pace as more and more offices, shopping centres are opting for ACs.