Daikin Industries aims to open a third Indian factory for home air conditioners in 2021, investing 10 billion yen (USD 88.4 million) to double its annual production capacity in the rapidly growing market to 2 million units.
The Japanese air-conditioning company plans to acquire land in western or southern India for the new plant, possibly this month. The fresh investment follows hot on the heels of the 2017 opening of Daikin’s second factory in the northern Indian state of Rajasthan. The manufacturer targets sales of 100 billion yen in India for the year through March 2021 double its fiscal 2017 tally.
The company has crafted a strategy to dominate the Indian market with locally tailored products, dividing the country broadly into five regions based on factors like climate and reliability of the power supply. It has developed units geared up to work in areas with heat surpassing 50 Degree Celsius as well as models with heating functions that are designed for regions where there is snowfall.
With Daikin’s expanded capacity and a bolstered marketing strategy that includes supplying cooling units to all 29 airports that opened in India during the past three years, the company aims to trounce local competitors as well as international ones like South Korea’s LG Electronics.
India’s home air-conditioner market is expected to reach 7.47 million units in 2023, surging by over 70 percent from 2017 while the global market grows just 20 percent, according to British research firm Euromonitor International.
Daikin, LG and Voltas each command shares of around 15 to 20 percent in the country, with the Japanese player claiming the top spot by sales in 2015. Other competitors in India include U.S. Company Carrier, as well as Japan’s Panasonic and the Hitachi group.
Daikin’s success in the country can be traced to the Indian unit’s CEO, Kanwal Jeet Jawa. The company struggled in India after entering the market in 2000. Then Jawa, who boasted a three-decade career in air conditioning, was appointed in 2010 to succeed the exiting Japanese chief.
Jawa reduced imports from Thailand and boosted local production to lower costs, letting Daikin launch ordinary household units priced about 20 percent below previous models at between 32,000 and 38,000 rupees (USD 450 to USD 540). Such units enjoy support from consumers despite costing about 30 percent more than Voltas’ products and 10 percent more than those of LG. The South Korean company’s two Indian plants have run at full capacity since last year, and it expects to produce about 1.6 million units in 2018.
Despite the lower prices for Voltas and LG, Daikin Senior Executive Officer Yoshihiro Mineno claims the cost cuts let the company “set prices in a range.” But as the Indian market expands, customers may grow increasingly sensitive to prices. — Nikkei Asian Review