Being one of the only two foreign executives on the board of Daikin, the Osaka-headquartered multinational air conditioning company, Kanwal Jeet Jawa, MD & CEO at Daikin Air-conditioning India is well-positioned to talk about the road ahead for global and domestic air conditioning companies given the sweeping effects of climate change. Here, he talks to TOI about the challenges and opportunities for Daikin in India.
You are only one of the two foreign executives on Daikin’s board. How did you feel about joining the board and what do you see as your role as one of the few international members of the board?
Yes, I am one of the two foreign executives on the board, the other being my colleague from Daikin China. The board seat at DIL remains a big task to shoulder, but as an international member I am expected to leverage my three decades plus experience, and my time spent at Daikin India to replicate the success story, elsewhere. India has been at the epicenter of business growth for all global organization since the last decade, while the global business landscape has been flat for some time now. While India, Chinaand Brazil offer great growth opportunities, the complexities in the market, channel dynamics and cost of doing business decelerates growth for MNCs. Global MNCs are increasingly placing their trust on Indian executives, especially at a time when several of them are struggling in their home turf, or finding the going tough in the largest markets, and are expecting India to play a bigger role when they are expanding to emerging markets. So, empowering domestic leaders helps to understand the pulse of the market, aids in faster decision making to facilitate growth, gets the best of local knowledge to promote R&D and deliver customized products for local customers, critical to creating value for the brand.
Given the effects of climate change, how do you think the global AC market is going to shape up in the near future?
The global Heating Ventilation & Air-conditioning (HVAC) industry is gradually shifting towards reliable and eco-friendly technologies & refrigerants. With rampant growth in HVAC requirements across the globe, the environment protection & rejuvenation must become the core responsibility of all companies. Products of the future will bear the stamp of sustainability, higher efficiency, low global warming potential, eco-friendly refrigerant & low power consumption. Daikin has created a core facility for future product developments with a new JPY38billion (€300m) technology centre at its Yodogawa factory in Settsu City, Japan. The new six-storey, 58,000m² facility will be the core base for Daikin’s future technology developments in air conditioning, inverters, heat pumps, and refrigerants. The building itself is also said to combine a number of Daikin technologies to achieve zero energy. Along the same lines, the Dakin India R&D centre at Neemrana is also busy researching new technologies that complement the Indian weather conditions and power availability patterns. India with 6-7 percent per AC penetrations is waiting to get to the explosion phase and we are in the process to develop ACs that are climate, power and temperature friendly other than providing ease of use riding on the back technologies & IOT.
Why are you absent from the window AC business?
Daikin has tested the viability of window AC market in India through test marketing at some locations. We are currently collecting research data that will help us with some directional lines, in the already shrinking window AC market. We believe that after 10 percent AC penetration, India will witness a huge demand for HVAC products, so we are preparing offerings at all levels of the market pyramid.
How difficult is it to position yourself as a premium brand, yet gun for maximum market share?
Daikin has never considered India’s premium-price-sensitive market as a barrier. Instead, we consider this a challenge that has helped us improve our product technologies
While downsizing price. Daikin’s strategy of higher localization has helped control prices too and placed us in an ideal position where we can offer the best products at
different price points due to our wide range. For example, local sourcing has curbed costs by nearly 35% as compared to our 2010 production expenses. Furthermore, by eliminating or minimizing costs in the value chain, we pursue a game-changer strategy for our energy-saving inverter ACs. This has allowed us to carve a niche in metro markets and helped gain a foothold and boost penetration in Tier I and II cities, which are the new drivers of growth in a resurgent India. Daikin already offers products at multiple price points, making it convenient for people to make purchases as per their means. As mentioned earlier, we have also minimized value-chain costs, which results in lower prices for consumers. Our Factory Unit I & II, is strategically located at Neemrana, Rajasthan on NH-8, in a sprawling area of 160,000 sq. metres entailed a total investment of more than Rs 2,000 crores. The facility has the capacity to manufacture 15 lakh Room ACs, 50,000 VRV units, one lakh Cassette units, 20,000 ductable units
and 1,000 chillers. India’s room AC sales which stood at 5 mn units in FY18 are expected to rise to 7 mn units by FY20, at 15% CAGR. Moving ahead, Daikin is committed to India and in addition to expanding the Neemrana manufacturing facility, it is looking at South of India, for its third factory, targeted for exports. We are targeting to sell 12-15 lakh units by 2020, and the growth areas will continue to be the tier 2 & 3 cities, smart cities.
What are the broad trends in the domestic AC market at present in terms of consumer preference?
The top four emerging trends driving the market include, internet of things(Smart Devices), rapid adoption of inverter air conditioners, demand for integrated systems and introduction of air purifying technology.
What is the split between B2B and B2C sales for Daikin?
B2B or commercial segment accounts for 45 percent of our sales while the residential or B2C segment accounts for the rest.
What are the challenges for AC makers in India?
India significantly lags behind other countries in terms of penetration. And distribution remains a major challenge.
There has been a proliferation of smaller brands due to e-commerce. Does it pose a challenge for larger players in the market?
Today, most garage manufacturers have shut shop or faced consolidation, so without any technological investment it is difficult to survive.
When it comes to retail, what is your perspective? You have been visibly absent from online channels.
Retail is an important vehicle to take the brand deeper into the Indian demographics & we are continuously investing in the growth and disciplining of the retail
Proliferation. In the online space, having researched for last few years, we have recently started to sell through Amazon, Flipkart & the Daikin Store has been operating since
What are your thoughts on sustainability? How can AC makers contribute in a positive way to the environment?
While the core of Daikin India’s product offerings remains the intermix of higher star rated cutting edge power saving technology coupled with robust customer service; it
also endeavors to bring technological advancements that support eco-friendliness & lower operating costs into the product mix. With consumers beginning to recognize the
need for an air-conditioning solution rather than a product only approach, they are also opening up to recognizing the benefits of the higher star rated and inverter products to
Control long term costs. In this parlance, while being energy efficient is the key, the technology to look out for would be inverter based products that are energy efficient in addition to offering an ease of operation, smarter controls & intelligent features.― Times of India