Baked by heat, Bangladesh expands AC manufacture

Companies have turned to local manufacturing and assembly of air conditioners (ACs) to cater to the rising demand for the home appliance as consumers are increasingly seeking respite from the soaring temperatures brought on by the impacts of climate change.

This has led the prices of ACs to decrease significantly, bringing it within the budget of more consumers and fuelling the growth of the market in a nation where per capita income has nearly quadrupled in the last 12 years.

Sales have grown exponentially, according to industry insiders, who also claimed that local manufacturers and assemblers now cater to more than 85 percent of demand.

There is no accurate market data on AC sales. Manufacturers and retailers estimate that 530,000 units were sold in 2023, increasing sharply from 330,000 units in 2022.

They attributed the increase to the impacts of global warming, substantial price reduction, and energy-efficient technology.

The year 2023 was confirmed as the warmest on record, driven by human-caused climate change and boosted by the natural El Niño weather event.

The trend has continued in 2024, with last month being the hottest March on record. Bangladesh also witnessed higher-than-usual temperatures in 2023.

According to industry people, ACs have become more affordable as most parts are now made locally.

With the exception of the main circuit and compressor, other components like plastic frames and copper cables are produced in Bangladesh. Parts such as internal wires are also sourced from local cable manufacturers.

However, raw materials and intermediate products need to be imported.

Around 20 local and multinational companies manufacture and assemble ACs in Bangladesh.

"ACs were considered a luxury item in Bangladesh before 2015. After that, the middle-income groups started buying the appliance whereas it could be seen in the high-income households alone in the past," said Syed Sabbir Zaman, head of product at Singer Bangladesh.

Before 2015, ACs were mainly imported while local assembly was only done on a limited scale, he noted.

Rifat Jahan, who lives in the capital's Mirpur, says her family bought an AC this time last year as temperatures seemed unbearable although their purchasing power has seen erosion owing to persisting higher inflation.

Her relatives in the small town in Jamalpur district have also purchased ACs, said the homemaker.

Zaman said multinational companies have started importing components and assembling ACs locally, buoyed by a significant reduction in import duty and tax holiday aimed at encouraging domestic production. Consequently, the market grew rapidly.

After 2020, local companies such as Walton, Minister, Jamuna, and Vision invested heavily in assembling and manufacturing ACs.

Zaman said the government has provided tax benefits to local AC manufacturers so local companies have entered the market on a larger scale.

In 2004, Electro Mart Limited, which produces ACs under a joint venture with Chinese home appliance manufacturer Gree, became the first company in Bangladesh to start assembling ACs although it was doing so on a limited scale after importing the necessary components.

At that time, the demand for ACs was 30,000 units at best, said Md Nurul Afser, deputy managing director of Electro Mart.

"Due to the growth of the market, we have evolved from an assembler to a manufacturer."

Electro Mart set up a full-fledged manufacturing plant in 2020 to make more environment-friendly and energy-efficient ACs. At present, it manufactures 80 models for both residential and commercial customers.

Its annual manufacturing capacity stands at 300,000 units per year.

Moztaba Nadim, brand manager of Elite AC, which makes and sells products of Midea, also a Chinese company, said the expanding middle-class population and fast urbanisation resulted in increased demand for ACs.

"The growing market demand has incentivised manufacturers to invest in production capabilities and innovation."

Nadim said the AC manufacturing sector has undergone significant improvements in terms of technology, quality, and efficiency, making it more competitive both domestically and internationally.

Walton, one of the largest AC manufacturers in Bangladesh, has a yearly production capacity of 200,000 units.

Salim Ullah Salim, director for marketing of Jamuna Electronics and Automobiles Ltd, said companies are increasingly investing in research and development to innovate and develop new technologies.

"Such initiatives have led to the production of ACs that consume less energy and have a reduced carbon footprint."

He credited the government for the flourishing of the sector by the way of offering incentives and subsidies and framing policies that promote industrial growth and competitiveness.

"Local manufacturers are adhering to international standards as they want to compete on the global market and ensure product reliability. This will boost consumer confidence."