Air conditioners are no longer considered luxury items in India, but have become a necessity during the scorching summer months for millions of households. However, concerns over rising electricity bills due to AC usage remain strong among consumers. This has prompted companies to focus on developing technology that keeps rooms cool while consuming less power.
Growth in AC Market and Electricity Consumption
According to IMARC Group, India’s AC market was valued at $6.15 billion in 2025 and is projected to rise to $7.07 billion in 2026. By 2034, the market could reach $21.59 billion. The increasing temperatures, urban expansion, and higher demand for cooling in homes are key drivers of this growth.
A recent 2024 survey conducted by the Bureau of Energy Efficiency (BEE) and CLASP across 4,321 households in 20 states revealed that cooling appliances contribute significantly to home electricity consumption. Fans, ACs, and coolers combined account for 40% of total household electricity use. ACs alone make up 11%, rising to 12% in urban areas.
The survey also noted that the proportion of homes with air conditioners increased from 10% in 2022 to 13.3%, with urban areas reporting 17%. This growth presents a dual challenge for companies: not only to sell more AC units, but to provide models that keep electricity costs down.
Emphasis on Energy-Efficient and AI-Enabled ACs
LG Electronics India highlighted a shift in customer priorities, with buyers now focusing on long-term operational costs rather than just the purchase price. Sanjay Chitkara from LG told ET Online that over 50% of their AC sales now consist of 5-star or higher energy-efficient models, an increase from 45% the previous year.
LG is prioritizing AI-based cooling, electricity consumption management, and connected device features. The demand for 5-star ACs in Q4 of fiscal year 2026 contributed to growth in the premium segment. The company’s residential AC sales increased about 20% in Q1 of fiscal year 2027.
Voltas is also incorporating energy-saving technologies and smart features into its AC products. Their AI-powered Vertis Split AC series includes AI Adaptive Cooling, AI Geo Fencing, and AI Energy Manager features. Daikin presents clear benefits of star ratings through its models: its 1.5-ton 5-star AC has a 5.70 ISEER rating and consumes 716.97 kWh annually, compared to 880.1 kWh for a 3-star model with a 4.40 rating. Samsung is following suit by offering AI-based cooling and energy management in new units.
Balancing Cost and Energy Savings
The BEE-CLASP survey showed that 40% of AC models in use are 3-star, 33% are 5-star, and 18% are 4-star. This indicates customers are adopting energy-saving options, though the highest rated models are not always the first choice. Gurugram-based climate-tech startup Optimist launched its first domestic AC in May 2026, priced around ₹39,990. This product boasts better energy efficiency and performance under high temperatures, claiming to reduce electricity bills by 25-35% compared to conventional models. Still, actual savings depend on usage and comparison models.
Despite 65% of survey participants having knowledge about energy-saving appliances, only 2% prioritize energy efficiency foremost when purchasing. There is also a disparity in AC ownership: 17% of urban homes have AC, versus just 4% in rural areas. Manufacturers face the ongoing challenge of creating affordable ACs that also reduce electricity consumption. Beyond residential needs, growing requirements for AI, cloud computing, and data centers are driving demand for efficient cooling solutions. Ultimately, consumers must decide how much extra upfront cost is worth the long-term savings on electricity bills.
