An all-out war is being waged between Korean and Japanese electric appliance makers over the rapidly growing Indian air conditioner market. As Japan’s Daikin, the world's No. 1 air conditioner manufacturer, announced that it would scale up production by one million units a year by building a new plant in India, Korea’s Samsung Electronics and LG Electronics responded, saying that they would significantly increase production and the number of models.
The Indian air conditioner market was valued at about seven trillion won last year, but is a major emerging market which grows more than 6% every year.
According to the air conditioner industry on May 8, Daikin of Japan will build new air-conditioner factories by investing 80 billion won in the southern and western regions of India this year. Daikin set up the second plant in 2007 by investing US$ 5.5 billion last year after opening its first plant in India in 2007. The company is now running the second plant, too. Currently, Daikin produces about 1.7 million units annually in India but set a new goal of increasing its production to 2.7 million units by putting the new plants into operation by next year. The company also plans to raise its sales volume by lowering its price by procuring air conditioner parts locally.
With a 40% market share in the world commercial air conditioner market, Daikin is enjoying a comfortable lead over Samsung Electronics and LG Electronics, which have market shares of around 5%. But particularly in the Indian market, Daikin is being relegated by Samsung and LG. The current Indian air conditioner market is estimated at seven trillion won, which accounts for a portion which is not small in the world air conditioner market amounting to 90 trillion won. Since 2010, India has seen the explosive growth of air conditioner sales due to scorching heat every summer, In India, Samsung Electronics and LG Electronics took the lead with a combined market share of more than 50% through a localization strategy, widening the gap with Daikin to more than 20%.
In response to Daikin’s expansion strategy for the Indian market, LG Electronics, which ranked first in the Indian air conditioner market, decided to drive up the number of air conditioners produced at two local plants from 800,000 last year to 1.2 million this year and 1.5 million next year. The company also launched localized products such as air conditioners that repel mosquitoes with ultrasonic waves by taking into consideration the fact that Indian people suffer big damages from malaria and dengue fever as well as products with design that can satisfy Indian consumers’ tastes.
Samsung Electronics has drawn up a plan to increase commercial air conditioners such as a windless four-way cassette model in the first half of this year. They made the plan based on a strategy to promote sales of system air conditioners to India's major public institutions and large commercial districts as specialized products targeting the Indian market.
"Japanese companies are employing the same localization strategy as Samsung and LG in India. This will fuel air-conditioner market competition between Korea and Japanese home appliance companies," said a representative of the air conditioner industry.