Daikin India to build third plant in booming aircon market

12, Jul. 2021

File photo of employees at Daikin's factory in Neemrana, in India's Rajasthan state. The company plans to grow into a manufacturing base for local and overseas markets. (Photo: Daikin Airconditioning India)
File photo of employees at Daikin's factory in Neemrana, in India's Rajasthan state. The company plans to grow into a manufacturing base for local and overseas markets. (Photo: Daikin Airconditioning India)

By Atul Ranjan

NEW DELHI, NNA - Daikin Airconditioning India Pvt. Ltd. plans to set up its third factory in India as part of its growth strategy to make the country its manufacturing hub catering to both domestic and foreign markets.

The local subsidiary of Japan’s Daikin Industries Ltd., a leading aircon producer, will also ramp up its existing research and development (R&D) facility.

The new plant will be built in Sri City, an integrated business city situated near the southern city of Chennai. Construction is expected to begin by the end of 2022.

“We have already bought the land, and the development work should start by the end of 2022,” Kanwaljeet Jawa, CEO and managing director of Daikin India, told NNA.

Jawa said the company is building an additional mechanical R&D center at Neemrana in the northern state of Rajasthan, where both of its existing factories are located. They have a capacity to produce around 1.5 million units of room air-conditioners annually.

The new factory is expected to have a similar capacity, according to a company executive.

In line with the parent company's aspiration to achieve net-zero CO2 emissions by 2050, the local subsidiary is currently working on developing climate-friendly aircons for India and the global market.

In April this year, Daikin in collaboration with Nikken Sekkei Ltd., emerged as one of the two winners of the Global Cooling Prize (GCP), an international innovation competition aimed at developing super-efficient and environmentally-friendly residential cooling solutions.

They came up with a prototype which reduces climate impact by five times compared with standard aircons now available in the market.

“Our prototype product for the GCP is our out-of-the-box concept. We believe that we have contributed to the creation of the first step of solutions that can provide safe and healthy air for the next generation by continuously challenging and generating the next innovations,” Jawa told NNA.

Jawa, who is also a member of the Daikin Industries board, said the Indian subsidiary plans to expand sales of its products locally and in overseas markets, such as Africa, the Middle East and Latin America.

According to ratings agency ICRA Ltd.’s recent note on Daikin India, the company has a strong market position in India. It has a good reputation for high-end, energy-efficient products, such as inverter air conditioners.

“The company’s growth momentum is expected to continue in the medium term, given the positive demand prospects for the Indian room air-conditioning (RAC) industry due to limited penetration,” ICRA said.

A March 2021 report by brokerage firm HDFC Securities Ltd. pegged the overall market size for air-conditioning products in India at around 175 billion rupees ($2.3 billion). Room air conditioners dominated the market, accounting for 112 billion rupees.

According to analysts Nilesh Bhaiya and Pratik Singh of brokerage firm Motilal Oswal, the Indian room aircon market has grown to over 7.2 million units in the fiscal year ended March 2020, from just 2.7 million units a decade ago. It grew at a compounded annual growth rate of around 10 percent on the back of the rising middle class and buying power.

The top six aircon players in the country are Voltas, LG, Lloyd, Blue Star, Daikin and Hitachi. They control 80 percent of the room aircon segment, said the analysts.

Experts believe India has a huge growth potential as it is still an under-penetrated market for durable products for homes such as aircons.

“The current industry producing 7 million units is expected to grow to 24 million units by 2029,” Jawa said.