Daikin To Invest Rs 1,000 Crore To Build New India Facility
The Indian arm of Japan’s Daikin Industries Ltd. plans to invest Rs 1,000 crore over two to three years to set up a new plant, availing incentives aimed at boosting local manufacturing.
Daikin Airconditioning India Pvt. will set up its third manufacturing plant in India at Sri City, Andhra Pradesh, where it will make air conditioners and related components, the company said in a statement. That will make it the first Japanese firm to invest under the government’s production-linked incentive scheme.
“This would also be our first compressor plant. Earlier, we used to import from our facility in Thailand but now we’ll be getting it in the country,” KJ Jawa, chairman and managing director of Daikin India, told BloombergQuint. “We expect the plant to be operational by mid-2023.”
On Friday, the company inked a deal to purchase 75 acres of land for the unit that will serve both domestic and international markets, according to a joint statement by Daikin Airconditioning India and the business hub Sri City. Daikin wants to make India its manufacturing hub for Sri Lanka, Middle East, South America and Africa.
The market for household air conditioners is expected to more than doubled to 16 million units by FY25, according to a CEAMA-Frost & Sullivan report. Air-conditioner penetration at 5-6% offers a huge potential for growth and consumers are looking for energy-efficient products with a lower total cost of ownership, Jawa said.
Daikin has invested more than Rs 2,000 crore so far in the country towards capacity expansion, including setting up its two other factories and a research and development centre at Neemrana, Rajasthan.
“India's the fastest growing market for us. Daikin has a clear strategic intent to enhance its air-conditioning, air filtration and refrigeration portfolio, for which India has been identified as a developmental hub,” Jawa said. “We believe India has the potential to become our offshore delivery centre for R&D and exports."
Sri City Founder Managing Director Ravindra Sannareddy said Daikin’s plan marks the first major investment in the business hub this year and can potentially create over 3,000 jobs.
Daikin isn't alone. Earlier this month, the central government had said as many as 31 companies, including Voltas Ltd., Panasonic, Hitachi, Blue Star Ltd. and Havells Ltd., have applied for availing PLIs to make components, proposing an investment of around Rs 4,995 crore.
The applicants will be selected by Nov. 15, Anil Agarwal, additional secretary in the Department for Promotion of Industry and Internal Trade, had said. Unlike the PLI scheme for mobile phones, where the finished goods as well as components are covered, the scheme for air conditioners only focuses on components production.
After the government banned import of air conditioners with refrigerants, more than 95% of such devices are locally manufactured, according to the Consumer Electronics and Appliances Manufacturers Association. But 75-80% of the components are imported.
Blue Star aims to invest Rs 156 crore, while Panasonic has lined up a plan worth Rs 300 crore for local component manufacturing.
According to Manish Sharma, India and South Asia president and chief executive officer at Panasonic, the average domestic value addition for the AC for the industry is around 20-25% and it may go up to 75% in the next five years as production of local components commences.