Johnson Controls-Hitachi Air Conditioning India, makers of Hitachi brand of air conditioners, is setting up a global design and development centre in India at a cost of $20 million (nearly Rs. 140 crore).
According to Gurmeet Singh, Chairman & Managing Director of the company, the investment has already been made and it is likely to be operational from September.
Nearly, 120-150 engineers will be working at the centre.
“The design and development centre should be up by September. It is nearly 80 percent ready,” Singh told BusinessLine.
The design and development services are critical to its India growth story. It already features on the financial results of the company as a separate segment.
Growth in India
After a lacklustre FY19 following a slow-down in AC sales, Hitachi is targeting a 15 percent growth this year. Room and commercial AC sales will be the drivers.
Turnover for FY19, remained near stagnant, on a Y-o-Y basis, at around Rs. 2,241 crore, while net profit stood at ₹86 crore (Rs. 100 crore), down by 14 percent. The company’s operating profit margin was 7.88 percent and net profit margin 3.83 percent.
AC sales are known to be seasonal with the first and last quarters (April – June and Jan – Mar) of a fiscal being the peak sale months.
“FY19 was not a good year for AC sales across the industry. However, April and May of this fiscal was positive. Roughly the market could have witnessed an 8-10 percent growth during this period,” Singh said.
In fact, Hitachi is expecting gains coming in south and west Indian markets, apart from the north where it has a relatively stronger presence. In order to bring down price of its offerings, Hitachi re-designed products and optimized costs. “Earlier we were premium by 20 percent. But, with product redesigning and cost optimization, we command a 3-4 percent premium. So we continue to be a premium brand, but with a much narrowed down product price gap,” he explained.
Hitachi’s manufacturing facility in India is at Kadi near Ahmedabad, Gujarat and it has a capacity utilization of 75-80 percent. The facility has a capacity to manufacture 900,000 split ACs in a single shift and can be ramped up. Almost all of its ACs sold in India, is Made-in-India.
Hitachi already began exports (from India) of room ACs to select markets that include West Asia, Sri Lanka and Bangladesh. Nearly 3 percent of its India turnover comes from export.
According to Singh, the company will tap West Asia, Africa and the SAARC region as it targets exports to go up to 5 percent of its turnover.
“India-made products have good acceptance in these markets. So naturally, we would look to tap them first,” he said.―The Hindu Business Line