Air conditioners are no longer just a luxury in India. This has become a necessity for millions of households in summer. But between buying and operating an AC, there is always a worry that how much the electricity bill will increase. This is the reason why AC companies are now focusing on technologies that can keep rooms cool while using less electricity.

According to IMARC Group estimates, India’s AC market was worth $6.15 billion in 2025, which could grow to $7.07 billion in 2026. It is expected to reach $21.59 billion by 2034. Rising heat, expanding cities and increasing need for cooling in homes are the main reasons for this growth.

AC alone accounts for 11%

At the same time, electricity demand in the country remained close to record levels in September as well. A 2024 survey by the Bureau of Energy Efficiency (BEE) and CLASP shows that cooling accounts for a large share of household electricity consumption. A survey of 4,321 households across 20 states found that fans, ACs and coolers together consume 40% of total electricity consumption. AC alone accounted for 11%, while in cities the figure was 12%.

According to the survey, the number of households with AC has increased from 10% to 13.3% by 2022. In cities, this figure was 17%. In such a situation, the challenge for companies is not only to sell more ACs, but also to introduce models that keep electricity costs low.

Companies emphasis on 5-star AC and AI features

According to LG Electronics India, consumers are now paying attention not only to the price of AC but also to the cost of running it for a long time. The company’s Sanjay Chitkara told ET Online that the share of 5-star or above energy saving models has increased to more than half of LG’s AC sales. Last year it was over 45%.

The company emphasizes features that manage AI-based cooling, power consumption and connected devices. According to LG, demand for 5-star ACs helped drive growth in the premium segment in the fourth quarter of FY26. The company’s residential AC sales increased by nearly 20% in the first quarter of FY 2027.

Voltas has also focused on energy saving technology and smart features in its ACs. Its AI-powered Vertis Split AC series offers features like AI Adaptive Cooling, AI Geo-fencing and AI Energy Manager.

Daikin’s models also explain why it’s important to look at power consumption with star ratings. The company’s 1.5-ton 5-star AC has an ISEER rating of 5.70 and an annual power consumption of 716.97 kWh. At the same time, the 3-star model has a rating of 4.40 and a consumption of 880.1 kWh. Samsung is also offering AI-based cooling and energy management features in its new ACs.

Cheap AC or electricity savings?

Among the ACs included in the BEE-CLASP survey, 40% of the models were 3-star, 33% of the models were 5-star, and 18% of the models were 4-star. That means consumers are embracing energy-saving options, but the most energy-saving models aren’t everyone’s first choice.

Gurugram-based climate-tech startup Optimist launched its first home AC in May 2026. The company sells this AC around Rs. 39,990 offering good energy efficiency and high temperature capability. The company claims that this can reduce electricity bills by 25-35% compared to conventional alternatives. However, the actual savings will depend on the usage and the AC being compared.

17% of households in cities have AC

The problem is that in the BEE survey, 65% of people said they know about energy-saving appliances, but only 2% look at energy efficiency first when making a purchase. Access to AC is also unequal. 17% of households in cities have AC, while the figure is only 4% in villages.

The biggest challenge facing companies now is to make ACs that are not too expensive and also save electricity. Apart from homes, the growing need for AI, cloud computing and data centers is also driving the demand for better cooling with less power. Ultimately, the question for consumers is how much more is worth paying while buying an AC to get a lower electricity bill.

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