‘Margins have crashed’: Blue Star’s Thiagarajan explains why AC prices are going up

The consumer durables industry is heading into the festive season with a difficult trade-off: manufacturers are raising prices to recover sharply higher input costs, even as the October-December period is critical for consumer demand.

Blue Star Managing Director B. Thiagarajan told Fortune India the company will raise prices by 8% from October, after absorbing a large part of the cost inflation ahead of the summer season. The increase will apply to air conditioners as well as refrigeration products such as deep freezers.

The move comes after the company saw its operating margin fall sharply to 3% in Q1FY27, from 10% in Q4 last year. Operating profit for Q1FY27 was ₹174.95 crore, a decline compared to ₹199.99 crore in Q1FY26. The EBITDA margin stood at 5.2% in Q1FY27 as compared to 6.7% in Q1FY26.

According to Thiagarajan, the industry has faced an 18% cumulative increase in costs since January, driven by energy costs, exchange-rate movements and commodities such as copper.

“Each company has got their own problem and each company is increasing at different period and scale,” Thiagarajan said. He added that copper prices have risen to more than double their earlier levels.

Why the price hikes are coming now

The industry had already started passing on some of the cost pressure before the summer season, but not enough to fully protect margins. Blue Star, for instance, had planned a 13% price increase before summer but could pass on only 5%. The company is now looking to pass on the remaining 8%.

“The margin has crashed completely and now we cannot anymore. We are trying to pass on another 8% during the festival season,” he said.

The timing is significant because the festive season is when dealers begin replenishing inventory after the post-summer lean period. Thiagarajan said dealers typically do not buy much in July and August after the summer season, with purchases picking up in August and September ahead of the festive period.

“When they are not buying, increasing the price has got no meaning,” he said.

The cost pressure has also been amplified by the broader macro environment. While the West Asia crisis has added uncertainty, Thiagarajan said the pressure predates the conflict, with exchange-rate movements beginning in December and commodity inflation building from January. Copper prices, he noted, are also influenced by demand from sectors such as data centres, AI and electric vehicles.

The price increases are not uniform across the industry. Godrej Enterprises Group said its appliance business has seen input costs rise 8-10% since its last price hike, putting pressure on margins. Business head Kamal Nandi said the company will raise prices by 5-7% in October, starting with air conditioners and refrigerators.

However, Godrej expects limited disruption to festive sales because much of the festive inventory has already been produced and is in the dispatch pipeline at existing prices. The company expects the price impact to be felt more clearly after the festive season.

LG Electronics India, meanwhile, said it will raise AC prices by 5-7% from October 1, while no decision has been taken on price revisions for other product categories.

For consumers, the immediate impact could therefore vary depending on the brand and inventory cycle. Festive offers, including EMIs and cashbacks, could soften the effect in the near term, but manufacturers' latest moves indicate that the cost pressure that has squeezed margins through the year is increasingly being passed through to the market