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Daikin to double India capacity with third air-conditioner plant

Daikin Industries aims to open a third Indian factory for home air conditioners in 2021, investing 10 billion yen ($88.4 million) to double its annual production capacity in the rapidly growing market to 2 million units. [Darkin: Market cap: 32.26B(USD); NI 1.7B; PE: 19; dividend: 1.16%; Rev: 20.66B; Net ratio: 8.23%; E:12.2B; RoE: 14%]

The manufacturer targets sales of 100 billion yen in India for the year through March 2021, double its fiscal 2017 tally.

India’s home air-conditioner market is expected to reach 7.47 million units in 2023, surging by over 70% from 2017 while the global market grows just 20%, according to British research firm Euromonitor International. [still small market compared to China which has 80m units sold locally in 2017]

Daikin, LG and Voltas — part of the Tata Group, India’s biggest conglomerate — each command shares of around 15% to 20% in the country, with the Japanese player claiming the top spot by sales in 2015. Other competitors in India include U.S. company Carrier, as well as Japan’s Panasonic and the Hitachi group.

Jawa reduced imports from Thailand and boosted local production to lower costs, letting Daikin launch ordinary household units priced about 20% below previous models at between 32,000 and 38,000 rupees ($450 to $540). Such units enjoy support from consumers despite costing about 30% more than Voltas’ products and 10% more than those of LG. The South Korean company’s two Indian plants have run at full capacity since last year, and it expects to produce about 1.6 million units in 2018.

Despite the lower prices for Voltas and LG, Daikin Senior Executive Officer Yoshihiro Mineno claims the cost cuts let the company “set prices in a range.” But as the Indian market expands, customers may grow increasingly sensitive to prices.

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