Daikin Industries is one the biggest air-conditioner producers of the world. In India, it is coming up as a fast-growing air-conditioner producer. Kuldeepak Virmani, Director and Senior Vice President, Operations (North and East), Daikin Industries, India spoke to BE’s Kishore Kumar Biswas.
Q) Daikin Industries is the biggest air-conditioning manufacturer in the world. Please elaborate your global presence.
A) Yes, we are the biggest air-conditioner producer in the world. Our annual revenue as a group is close to $25 billion. The group was founded in October, 1924 and is headquartered in Osaka, Japan. Daikin operates in Japan, China, Australia, United States, India, South East Asia, Europe, Middle East, Latin America and Africa.
Q) Tell us about your Indian operations.
A) In India, Daikin’s only manufacturing plant is in Neemrana in the state of Rajasthan. Our purpose is not only to produce for India but also for addressing some of our export requirements. We hope we will be able to export 20% of our products manufactured in India by FY 2025. We can also support some of our group companies by exporting some important components like compressors or any other components. Now, we are buying some components from Daikin Thailand. So, in the coming days, we can supply India made components to Daikin Malaysia or to other Daikin subsidiaries located in foreign shores. It will take time as it takes a large investment to build component manufacturing units in other parts of India. India, like China, can be used as an export hub. We also need large land parcels in India to enhance our exports from India by 40% by 2030.
Q) What is your revenue in India?
A) In India, our revenue has been `5000 crore in FY 20. But it came down to `4300 crore in FY 21. In FY 22, it may be around `5200 crore as per our current estimates. In the next FY, we hope to cross `6000 crore.
Q) Some estimates show that by 2040, India’s sale of air-conditioning units will increase by four times. Is it possible within a period of 16 to 18 years?
A) Yes, it is possible. The present AC penetration is about 6%. It may increase manifold. The refrigerator penetration is much more in India and is around 35 or 40%.
Q) The economy has shrunk heavily due to the pandemic. It will take time to recover. The source of new demand will be middle and upper middle-class customers. They are heavily affected by the pandemic. How do you expect a high demand boost in India?
A) See, there are multiple sources of demand generation in India. Actually, disposable income is rising in India. Income was down only in the Covid phase under unnatural circumstances. The long-term estimate is very positive. There are factors that will increase the demand for ACs in the future. One is price. In future, the price of AC units will come down to `25 to `30 thousand. That will increase affordability. The use of cheaper but more effective material inputs will be made in due course of time. Instead of components made of copper, components made of aluminium or other alloys will be used. But the quality of the products will not be compromised – rather their efficiency will increase. Other factors are also there. We can avail the Production Linked Incentive (PLI) subsidy scheme of the government which may lower input cost by about 6%. This is because components of many producers used in different AC units will come down by utilising the PLI scheme. The other factor is the GST rate. We hope it will come down to 18% from 28%. So, the price may easily come down by 10%. We will also produce ACs for smaller rooms. Electricity consumption will come down to very low levels. So, it is not the middle classes only. The common masses will also be consumers of room ACs within a few years.
Q) Do you have any plans to produce transport and commercial refrigeration in India?
A) We have that product in other countries but we have no plan to launch those products in India. In Japan and Europe, we have those products. Actually, there should be a very developed service infrastructure before launching transport refrigeration. At present, we do not have that in India. If AC on a vehicle breaks down in the remote place carrying high value goods, it needs immediate service. As regards to commercial refrigeration, we have just entered this sector.
Q) Daikin air conditioners are cooperatively costly. How will you attract the market in India?
A) Price is not the sole factor. The most important factors are cooling capacity and electricity charges. We are the best in those aspects. Our service infrastructure is being developed. So, Daikin will be a preferred brand in the future.