PLI push and rising demand take AC makers deeper into South India

Tirupati: Call it the AC industry’s cool migration — from the North to South India.

Enthused by the Centre’s production linked incentive (PLI) scheme and the strategic need to be closer to fast-growing southern markets, leading air-conditioner makers are redrawing India’s manufacturing map.

In the last five years, major AC makers such as Daikin, Blue Star, LG, Carrier and Havells Lloyd have opened new factories in Sri City, Andhra Pradesh. Also, Voltas, a Tata Group company, and Mitsubishi Electric recently established AC manufacturing units in neighbouring Tamil Nadu. These facilities along with Samsung India’s existing plant in Sriperumbudur are turning the 100-km Sriperumbudur-Chennai–Sri City corridor into the country’s newest — and hottest — AC manufacturing belt.


Ravindra Sannareddy, co-founder and managing director of Sri City, an 8,500-acre private industrial city in Andhra’s Tirupati district bordering Tamil Nadu, told ET that the city he built in 2008 has now emerged as a magnet for India’s AC industry, among others. Sri City has attracted investments from as many as 10 AC manufacturers-—both global and Indian companies—and 34 component suppliers over the past five years.

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Their combined capacity is expected to touch eight million units next year. “That means by 2027, around 60% of the ACs produced in India could come from Sri City alone,” said Sannareddy. “If we include the factories of Samsung, Mitsubishi Electric and Voltas in nearby Tamil Nadu, the share would be considerably higher.”

The numbers point to a broader shift underway in the industry — AC manufacturing in North India, which took root with American major Carrier’s early bet on Gurugram in the 1980s, followed by Japanese giant Daikin’s plant at nearby Neemrana in Rajasthan in 2008, is now steadily migrating southward. Until 2023, when Daikin and Blue Star began rolling out AC units from Sri City, Samsung’s facility at Sriperumbudur was the only major AC manufacturing hub in the South serving the regional market.

A plant manager at one of the AC manufacturers in Sri City said the economics of moving production closer to southern markets are compelling. Setting up a factory in Chennai or Sri City can save about `1,200 per AC, he said, with the proximity of a major port adding another crucial advantage. Sri City, for instance, is just 65 km north of Chennai port. “About 50-60% of our AC components are imported, so having a port so close makes a big difference. And consider the cost of transporting finished ACs all the way from North India to the South,” he said.

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The geographical advantage also dramatically cuts the order-todelivery cycle — from around 12 days to just three for customers in the South.

“So, when we calculate the overall logistics benefit, the saving works out to roughly `1,200 per unit, apart from the much shorter turnaround time,” the manager said, requesting anonymity.

An engineer with another AC maker in Sri City gave a more nuanced explanation for the industry’s southward shift — the South simply stays hot for longer. “In South India, there is hardly any real winter,” she said, asking not to be named. “It is either summer—like now—or peak summer in April and May. “It is already the first week of October. But can you really switch off your AC in any city in Andhra Pradesh?” she quipped. The point, she emphasised, is simple — for AC makers, the South is not just a growing market; it is a market with a much longer cooling season.