Daikin to go ahead with its plan for third manufacturing unit in India

Notwithstanding the COVID-19 disruption, Japanese air conditioner maker Daikin will go ahead with its investment plan for setting up a third manufacturing unit in India, in a bid to augment the local production capacity, a top company official said on Thursday.

Daikin Air conditioning India, a wholly-owned subsidiary of Japan-based Daikin Industries, said the company is ready to take advantage of the – Phased Manufacturing Program (PMP), under which the government has announced incentives for manufactures to promote "Make in India".

The company, which has plans to set up a third manufacturing unit in South India, would make an announcement regarding it very soon after finalising the site. This new plant would cater to the African markets besides the domestic one.

"Daikin is ready to take the advantage of PMP and remain committed to invest in the third manufacturing unit to augment local production capacity," Daikin Air conditioning India MD & CEO Kanwal Jeet Jawa told PTI.

Jawa, who is also the first Indian on the board of Daikin Industries, said PMP could be game-changer and is a "bold and pro-active step" from the government to boost Indian manufacturing capabilities and support the economy with more jobs, consumption, and trade.

Daikin India had already shared its intent on the local value addition during the past few months.

The company sees COVID-19 as a short-term disruption and believes in the long-term potential of the Indian market.

"Considering China produces more than 100 million ACs per year, the Indian market of 6.5 million units bears a great potential, if a comprehensive plan can be implemented to support local manufacturing and grow the market," he said.

Jawa further said around 40 percent sales of the air conditioners are in the month of March to June and almost half of that has gone due to COVID-19 related disruption in the market.

"The AC industry, like many others, is also impacted in terms of – demand fulfillment, manufacturing and after-sales service leading to a 30 percent sales drop during the lockdown," he said adding "we have a complete washout in the month of April. We have some billings in the month, only to some COVID-19 hospitals and centers".

However, Jawa is hopeful and expects a revival in June.

"With the late summer and pent-up demand, we are witnessing consumers returning to buy ACs. With gradually opening of the economy many small and medium businesses are now in need of air-conditioning like before, hinting towards a steady growth," he said adding that normal growth for the industry would return by the last quarter of FY21.

While talking about FY20, Jawa said it was a good year for Daikin India, but towards the end, it had to face challenges owing to COVID-19 situation. "Last year was very good and we had recorded a net sales of around Rs 4,200 crore," he said.

The company, which has recorded a net sale of Rs 3,250 crore in FY19 along with a CAGR of 118 percent, has invested around Rs 2,000 crore in India so far.

Daikin Air conditioning India has two manufacturing units and one Research and development (R&D) centre at Neemrana, Rajasthan.

Japan-based Daikin Industries, is one of the leading global manufacturers of both commercial and residential air-conditioning systems.