07 Aug 13 CFL industry in India – still light at the end of the tunnel!

LED is the new buzz word on the Lighting canvas around the world, and India is no exception. Driving on the back of energy efficiency and environment friendliness, LEDs are set to take over as a front runner in the lighting industry surpassing CFLs & FTLs in the next 5 years.

The dominance of CFLs, in the last decade, is expected to see a downturn especially in the Metro’s and Tier 1 cities. Given the high awareness level of the end users, and government’s initiatives to incorporate energy efficiency policies in high energy consumption areas, LEDs are turning out to be the poster boys of the lighting industry. End users in these areas have a higher purchasing power and prefer to invest a little more initially to gain the long term returns. It’s just a matter of time, when suburban and rural users will also shift from traditional lighting to LEDs. The contribution of LEDs has grown four fold in the last 4 years and is expected to grow at nearly 45% CAGR for the next 3-5 years.

However, it does not mean that CFLs will be obsolete in this time period. They will still continue to grow but at a much slower rate when compared to the last 5 years. There is still a large part of populace in India which, by no means, can afford LEDs right now. Since the LED chips are not manufactured in India, the cost is bound to be on the higher side, whereas CFLs are affordable for the masses.

The government has been one of the biggest contributors to the overall CFLs market, as for the last 10 years they have been trying to push CFLs as against older technologies. For example, Punjab State Power Corporation (Powercom) replaced almost two crore ICL bulbs with CFLs across the state under Bachat Lamp Yojna in 2009. Similarly, Karnataka government also planned a phase out plan for ICLs where they were giving free CFLs in exchange of ICL bulbs. But in the last two to three years, the growth of CFL lamps has slowed down a little bit.

Expected impact of LEDs growth on the contribution of CFLs to the overall lighting market

It is quite apparent that the shift towards LEDs in the long run is inevitable. But, in the short run the CFL manufacturers need not worry. The CFL manufacturers should aim at devising strategies which cater to the immediate CFL demand and the potential future demand of LEDs. They should aim at expanding their capabilities in establishing themselves as leading LED suppliers. The bigger companies can look at acquiring smaller LED manufacturers and gain synergies. The next step should be marketing themselves to the right people in the right areas, i.e. the cash rich end users and high energy consuming geographies. As far as CFLs are concerned, the manufacturers should aim at directing their distribution efforts in suburban and rural areas to cater to the large demand of CFLs in these regions.

For more information on the expected trajectory for the CFL industry in India, government initiatives for energy efficiency, end user segmentation and geographical contribution, please refer to our White paper on “The effect of LEDs growth on the CFLs market in India”.