Daikin Industries, the world’s largest air-conditioning manufacturer, is making a bold move in the red-hot Indian AC market by setting up a massive 33-acre manufacturing facility in Sri City, Andhra Pradesh. This investment is a significant step in expanding Daikin’s production capacity in India, marking its third manufacturing plant in the country. But why is Daikin, a global powerhouse, betting so heavily on India? Let’s explore.
The Indian AC Market: A Rising Star
India’s air conditioning market is on the verge of explosive growth. With rising temperatures and heat waves becoming more frequent, air conditioners are rapidly shifting from being a luxury to a necessity. The Room AC (RAC) market in India is expected to grow at a compound annual growth rate (CAGR) of 12%, reaching a market size of INR 50,000 crore by 2028-2029. This growth potential is attracting giants like Daikin, which has already committed to producing 5 million AC units by 2030, with 4 million dedicated to the domestic market alone.
Why India? Tapping into a Massive Opportunity
- Untapped Market Potential: According to Kanwal Jeet Jawa, CEO of Daikin India, about 93% of Indian households still do not own an air conditioner. With an increasing number of aspirational Indians gaining disposable income, this presents a massive market opportunity. Blue Star, another major player in the industry, has noted that 95% of the current market comprises first-time buyers, with 65% of these located in tier-three, four, and five cities.
- Energy Consumption and Growth Potential: India’s power consumption for cooling is only 25% of the global average. As more Indian households adopt air conditioning, substantial room exists for growth. This is further fueled by India’s dynamic market and its skilled workforce, aligning perfectly with Daikin’s global vision of expansion and sustainability.
- Government Support Through the PLI Scheme: India’s Production Linked Incentive (PLI) scheme aims to boost domestic manufacturing and reduce dependence on imports. As a primary investor under this scheme, Daikin stands to benefit significantly from government incentives, which include a 4-6% refund on additional sales made over the previous year. The scheme has already resulted in the addition of domestic value in the AC industry, jumping from 25% to 45% in just 18 months.
Daikin’s Strategic Expansion
The new Sri City plant is a key part of Daikin’s strategic management plan, known as “FUSION25,” which focuses on establishing a major base in India. This facility not only enhances Daikin’s production capacity but also supports its commitment to sustainable practices and regional growth. The plant will cater to both domestic and export markets, supplying high-efficiency air conditioning units to neighboring Asian countries, the Middle East, and Africa.
Daikin’s latest investment is more than just a factory; it’s a statement of faith in India’s growth story. With government support, a growing market, and rising consumer demand, the future of the AC sector in India is looking cooler—and more lucrative—than ever before.
