- India’s air conditioning market could grow from $6.15 billion in 2025 to $21.59 billion by 2034 as rising temperatures and urbanisation increase demand for cooling.
- Manufacturers are expanding energy-efficient models and AI-powered features as electricity costs rise, but affordability continues to limit consumers’ adoption of high-efficiency appliances.
India’s air conditioning industry is accelerating its shift towards energy-efficient cooling as rising temperatures, growing electricity demand and household power bills reshape consumer preferences. Manufacturers, including LG Electronics India, Voltas, Daikin and Samsung, are introducing advanced technologies to help consumers reduce electricity consumption while meeting the country’s growing demand for residential cooling.
According to a market forecast by IMARC Group, India’s air conditioning market could expand from $6.15 billion in 2025 to $7.07 billion in 2026 before reaching $21.59 billion by 2034. Rising temperatures, urbanisation and increasing demand for residential cooling underpin the projected growth.
The expansion also presents challenges for India’s electricity system. Domestic power demand approached record levels during September 2026, according to reporting by The Economic Times, as unusually hot weather increased cooling requirements.
A 2024 household survey by the Bureau of Energy Efficiency (BEE) and CLASP, which covered 4,321 households across 20 states, highlights the growing electricity burden. Fans, air conditioners and air coolers accounted for 40% of household electricity consumption among surveyed homes. Air conditioners alone represented 11% of total household electricity consumption and 12% in urban households.
The survey found that AC ownership increased from 10% of households in 2022 to 13.3% in 2024. Ownership reached 17% in urban households, while 55% of the air conditioners in surveyed homes had been purchased within the previous five years.
These trends are pushing manufacturers to compete on operating costs alongside purchase prices. Five-star energy ratings, inverter technology, artificial intelligence (AI) and intelligent energy-management systems now feature prominently in companies’ efforts to attract cost-conscious consumers.
Manufacturers Expand High-Efficiency AC Models
LG Electronics India reports growing demand for high-efficiency air conditioners as consumers increasingly consider the lifetime cost of ownership.
“More than half of LG’s AC sales now come from five-star or high-efficiency models, up from more than 45% last year,” Sanjay Chitkara, Co-Chief Sales and Marketing Officer at LG Electronics India, told ET Online.
The company offers AI-enabled adaptive cooling, intelligent energy management and connected appliances designed to optimise cooling performance and electricity use.
LG also identified five-star air conditioners as a key premium category supporting growth in the fourth quarter of FY26 and increasing average selling prices. The company reported approximately 20% growth in residential AC sales in the first quarter of FY27.
LG expects rising AC penetration, replacement demand and premiumisation to drive further market growth over the next three to five years, particularly in tier-2 and tier-3 cities.
Voltas is pursuing a similar strategy. Its latest annual report highlights improvements in energy efficiency, product segmentation and features tailored to changing consumer preferences. The company has also introduced its AI-powered Vertis Split AC series, which includes AI Adaptive Cooling, AI Geo Fencing and AI Energy Manager to adjust cooling and manage electricity consumption according to operating conditions and user requirements.
Daikin offers consumers different efficiency levels across its air conditioning range. Its 1.5-tonne, five-star model carries an Indian Seasonal Energy Efficiency Ratio (ISEER) rating of 5.70 and rated annual power consumption of 716.97 kilowatt-hours (kWh). Its comparable three-star model has an ISEER rating of 4.40 and rated annual consumption of 880.1 kWh.
These figures illustrate how efficiency ratings and annual electricity consumption can help consumers compare products before purchasing. Inverter technology and energy-saving operating modes also help manufacturers manage power consumption.
Samsung has similarly incorporated AI-enabled cooling and energy-management features into newer air conditioning models to adjust cooling according to usage patterns and surrounding conditions.
Three-Star Models Still Dominate Household Ownership
Despite the industry’s emphasis on efficiency, consumers continue to purchase a substantial share of lower-rated models.
The BEE-CLASP survey found that three-star air conditioners accounted for 40% of units in surveyed households. Five-star models represented 33%, while four-star models accounted for 18%.
The findings indicate that consumers have not fully shifted towards the most efficient appliances, even as manufacturers expand their premium offerings. Higher upfront costs remain a key obstacle to wider adoption.
Gurugram-based climate-tech startup Optimist is seeking to address this challenge through an efficiency-focused residential air conditioner. The company launched its first residential model in May 2026, positioning the product around energy efficiency, high-temperature performance and greater visibility into electricity consumption.
Optimist prices its AC at approximately Rs 39,990 and claims that it can reduce electricity bills by 25–35% compared with typical alternatives, with seasonal savings of up to Rs 8,000. Actual savings will depend on usage patterns and the products consumers use for comparison.
“The biggest climate impact of an air conditioner isn’t when it’s manufactured; it’s when it’s used,” Ashish Goel, Optimist’s co-founder and chief executive, told ET Online.
Founded in 2024, Optimist raised $12 million in seed and pre-Series A funding in January 2026. Accel and Arkam Ventures led the funding round.
Affordability Remains a Major Barrier
The BEE-CLASP survey highlights a gap between awareness of energy efficiency and actual purchasing decisions. Although 65% of respondents reported awareness of energy-saving appliances, only 2% said they consistently prioritised energy efficiency when buying appliances.
This gap presents a challenge for manufacturers seeking to expand sales of premium air conditioners. Companies must demonstrate that the long-term electricity savings justify higher upfront prices, particularly for households with limited purchasing power.
The survey also revealed significant differences in AC ownership across income groups and between urban and rural households. Air conditioners featured in 17% of urban homes but only 4% of rural homes. Ownership reached 53% among upper-class households, compared with 43% among middle-category households and 4% among households in the lowest category.
These disparities highlight the need for affordable, energy-efficient cooling solutions that can serve a wider share of the population without significantly increasing household electricity expenditure.
Efficient Cooling Gains Importance Beyond Households
India’s cooling challenge extends beyond residential buildings as artificial intelligence, cloud computing and digital infrastructure expand. Data centres require substantial cooling capacity, increasing the importance of technologies that reduce energy consumption while maintaining reliable operating conditions.
“Energy-efficient and climate-first cooling technologies are definitely going to play a role in reducing the data centre energy demands,” said Shubhojeet Chakravarty, Partner of Data Centers at PwC India.
For the air conditioning industry, these developments create opportunities to combine technological innovation with lower operating costs. However, manufacturers must also address the affordability gap that prevents many households from choosing more efficient appliances.
As India’s demand for cooling grows, the industry’s long-term success will depend on its ability to deliver reliable performance, reduce electricity consumption and make energy-efficient air conditioners accessible to more consumers.