AC companies move south, betting on PLI

The air-conditioner industry is experiencing a southward migration within India, driven by the Centre's production-linked incentive (PLI) scheme and the strategic need to be closer to fast-growing southern markets. Major AC manufacturers such as Daikin, Blue Star, LG, Carrier, and Havells Lloyd have established new factories in Sri City, Andhra Pradesh, and Voltas and Mitsubishi Electric have set up units in Tamil Nadu.

The Sri City corridor, spanning 100 km between Sriperumbudur, Chennai, and Sri City, is emerging as the country's newest and most vibrant AC manufacturing belt.

Ravindra Sannareddy, co-founder and managing director of Sri City, notes that the 8,500-acre industrial city has become a magnet for AC manufacturers, attracting investments from as many as 10 global and Indian companies, along with 34 component suppliers over the past five years. The combined capacity of these facilities is expected to reach eight million units next year, potentially accounting for around 60% of India's AC production by 2027, including Samsung, Mitsubishi Electric, and Voltas in nearby Tamil Nadu.

The shift in manufacturing from North to South India is part of a broader trend. Until 2023, Samsung's Sriperumbudur plant was the sole major AC manufacturing hub in the South. A plant manager in one of the Sri City factories explained that the economic benefits of moving closer to southern markets are compelling, with potential savings of `1,200 per AC due to reduced production costs and proximity to a major port.

This geographical advantage also significantly shortens the order-to-delivery cycle, from around 12 days to just three days for customers in the South.

The longer cooling season in South India, with minimal real winters, further incentivizes AC manufacturers to establish their production facilities in the region.