Air conditioner prices cool, but demand stays hot

The past years have seen major increases in the prevalence of air conditioners, specifically in luxury homes.

Israeli consumers spent some NIS 1.5 billion on 380,000 air conditioners last year, and the extraordinarily hot weather that has visited the region recently may well signal the start of another equally strong sales season. Home air conditioning has begun to be considered more of a necessity than a luxury in Israeli society, and the past years have seen major increases in the prevalence of air conditioners, specifically in luxury homes. The Federation of Israeli Chambers of Commerce (FICC) Commerce Division reports that 68 percent of Israeli households own at least one air conditioner, up from 30% 10 years ago. Among the top 20 percentiles of earners, that rate is now 87%. Rafi Friedman, chairman of the home appliances division at the FICC and former head of the Elektra retail chain, says the improved economic conditions in the country and the decline in prices have brought more consumers to furnish their homes with air conditioners - or replace their old, noisy ones with the latest models. Air conditioner prices have dropped by 30% since 2000, according to a statement released Monday by the FICC. The price drop is being attributed to the steady cut in taxes and customs on air conditioners, culminating in last June's decision by the government to completely eliminate what had then been a 10% tax on air conditioner purchases. Strong competition is also contributing to the price decline, despite such inhibiting factors as the worldwide increase in raw material costs and recent "green" regulations that have contributed to increased production costs. The recent decline in the dollar is not expected to affect cost to the consumer significantly, according to Friedman, as the majority of units are either imported from China, with its strong Yuan, or produced locally. In 2004, the government required air conditioner manufacturers to use refrigerants that do not deplete the ozone, costing producers 20% more in production costs, which translated into a 6% cost increase to the consumer. Another major issue in air conditioner sales is energy efficiency, rated in terms of coefficient of performance, or COP, and labeled for consumers on a scale from A to G (A is the most efficient, G the least efficient). The Standards Institute of Israel estimates on its Web site that a difference of 0.1 in COP for a kilowatt hour can mean a difference of NIS 50 in the yearly electric bill. The difference between an A and D rating (.15 COP) for a standard 2 kilowatt hour machine can translate into NIS 150 in savings over one year.