Blue Star MD Warns of Chilling Effects on Summer Sales Amid Iran War Uncertainty and Economic Pressures

Blue Star Warns of Potential Decline in Demand Due to Iran War

Blue Star, India's second-largest homegrown room air conditioner (AC) manufacturer, is bracing for a potential decline in demand due to the ongoing conflict in West Asia. The company's managing director, B Thiagarajan, expressed concerns about the market sentiments and economic fallout of the conflict, rather than production interruption.

Demand Growth Outlook Revised

Blue Star had initially expected a 25 percent growth in demand this summer, but the ongoing conflict and economic uncertainty may impact this outlook. Thiagarajan stated that the company produced inventory anticipating a strong summer, but the current economic climate, including possible inflation and a weakening exchange rate, may lead to a decline in purchasing power.

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Price Hike and Material Costs

The company has already implemented an 8 percent price hike to offset rising material costs and plans to roll out a further 5 percent price increase this month, attributed to new energy labelling mandates. Secondary transportation costs and issues with materials like polystyrene and steel are expected to add to the company's financial strain.

Gas Supply Concerns

Blue Star is closely monitoring gas supplies, which are essential for brazing and powder coating. While the company is currently receiving 100 percent of its gas supply, Thiagarajan warned that even a week's supply disruption would be "serious" and could impact production.

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Industry Concerns with Gas Supply Cap

The government's 80 percent supply cap, calculated on a six-month average, is "misleading" for the AC industry, according to Thiagarajan. He emphasized that the company's peak summer production requirements are different from the off-season consumption patterns, making the supply cap inadequate.

Key Figures

• 25%: expected growth in demand this summer
• 8%: price hike implemented to offset rising material costs
• 5%: additional price hike planned for this month
• 100%: gas supply received by Blue Star
• 80%: government's supply cap, calculated on a six-month average