Bringing convenience home Home Automation in India - Fast evolving and rapidly growing

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1 Bringing convenience home Home Automation in India - Fast evolving and rapidly growing Home automation in India is rapidly growing and is used in a variety of applications across residential, commercial and hospitality segments. An overview of the market and drivers impacting its growth 2015 Redseer Consulting

2 CONTENTS 1. Functional Segments Market Analysis... 2 a) Customer segment analysis... 2 b) Product segment analysis... 2

3 Technology is a critical factor in the way we function today; disruption through technology has bought forth some of the most efficient solutions in many aspects of life today. From smart phones, internet banking, e- commerce, to new age innovations such as wearable technology and smart homes, technological innovation is impacting our lives like it has never before; stitching together people, systems and solutions seamlessly. Home automation could have well been a part of science fiction many decades ago, but is a reality today. Home automation has its roots in smart home appliances which has over the years led to the development of integrated smart homes. Home automation today largely consists of four functional segments Lighting, Security, Audio/Video and HVAC (Heating, Ventilating and Air Conditioning). Residential usage is the highest in the market and accounts for nearly 60% of the home automation industry. Functional segments in home automation The home automation market in India is expected to reach INR 8800 crores by The key growth drivers for this demand are increasing consumer awareness and financial ability, product innovations (like smart phone apps), builders requirement for market differentiation and an increase in the preference for energy efficient systems. However the market is still in its growth phase with a significant gap for more innovative and connected systems. Some of the key constraints include high product costs and moderate levels of satisfaction among the customers. Home automation market growth in India 1. Functional Segments Home automation can be delivered either through wired or wireless systems. Wired systems are typically used when the automation is done at the time of construction, making installation easier. Wireless technology largely relies on existing wired structures at home, such as phone lines and power lines. Wireless technology is however less invasive and more convenient and given the proliferation of smart phones and smart home appliances, are fast gaining popularity. The four functional segments of home automation in India include Lighting, Security, Audio/Video and HVAC (Heating, Ventilating and Air Conditioning). Major driving forces for installing smart home systems are convenience, energy conservation and security. Smart home systems today, help control anything from climate/temperature, security cameras, locks, sensors and entertainment systems among others. A detailed segment wise breakdown of the systems are given below: 1

4 Segment wise items and control setups 2. Market Analysis a) Customer segment analysis The residential segment accounts for nearly 60% of India s home automation industry (out of which individual homes and villas account for 75-80% of market and builders account for ~20% of market). This segment has the highest growth and is currently growing at a CAGR of 35-40%. The market for residential home automation is highly fragmented, especially in home security systems. Commercial spaces contribute to 30% of the home automation market. This segment is largely driven by security and access systems. Large companies like Samsung, Bosch and Honeywell dominate this segment in India. Efficient building management systems are fast gaining popularity in India as well. The hospitality industry also uses home automation and accounts for 10% of the market. Security and lighting systems are popular in this sector due to the growing need for differentiation. The lighting market is largely driven by the residential segment. In India, the industry is still dominated by remote control solutions as mobile apps and other advanced solutions are costlier. Lutron, Philips and Legrand dominate the lighting market in India. Security systems are also becoming very popular in India and are used by both the residential and commercial segments. CCTVs accounts for about 25% of the security systems. The market for security systems is however highly fragmented between local, Chinese and other international players. HVAC and Audio/Video systems account for about 15-20% of the market and is typically provided in hotels and commercial complexes; residential applications are still low. HVAC is largely done in complexes with centralized air-conditioning. A market split by product and customer segments can be seen in the chart below: b) Product segment analysis Lighting and security are the top selling products in home automation, accounting for nearly 80-85% of the market. 2

5 It can be seen from the chart that lighting is the largest component of the residential market while security is the largest component of the commercial market. Market split by customer and functional segments Overall, the market is highly fragmented, largely due to the low entry barriers. Availability of open source technologies makes it easy to enter the market. Innovation is the driving force of the industry and the market is evolving fast both in terms of technology and features (mobile apps etc.). In India, the home automation market is expected to grow significantly over the next few years and will witness growth both in terms of number of players and technologies offered. 3

6 Authors Research & Analysis Niteesh Verma (Associate Consultant) Associate Consultant Pavithra Babu (Consultant - Content & Thought Leadership) About RedSeer RedSeer is one of the fastest growing research and consulting firms in India. It's unique service offerings serves decision makers across the value chain. RedSeer works across the sectors with specific focus on auto, construction, farm equipment s, healthcare, CPG/retail/e-commerce, funds, investment banks & technology sectors. For more information, visit redseerconsulting.com 4 BANGALORE DELHI MUMBAI