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Where does Daikin stand in India HVAC market?

India HVAC market

Consumer Goods and Retail | Jul, 2021

Japanese HVAC major Daikin is aiming to be a Rs 5000crore company, while contemplating an astonishing 20% growth in sales. The market is booming due to the rising demand of the power efficient inverter air conditioning systems and the ever expanding sales network of the company. Thanks to thriving HVAC market in India, the company is among the many others who are enjoying exponential growth in the country.

Daikin commands 60 per cent market share in variable refrigerant volume (VRV) system – well, that is another name for commercial air conditioning system. The company expects to contribute more than 18% - 19% to the residential AC market in India. Meanwhile Daikin has several other pluses to its side. The company has a stable top management, skilled workforce powered by ingenuine Japanese work culture that is known for excellence and innovation.

Enthralled with such a phenomenal growth in India, the company has committed big size investments for setting state of the art Research and Development (R&D) centers across India, Sri Lanka and the Africa region.

How big is India HVAC market?

The India HVAC market is forecasted to surpass over 4.5 million air conditioning units by volume in the next 5 years, as per the market research report released by global research-based consulting major TechSci Research. The company in its report titled “India HVAC Market By Product Type (Direct Expansion Systems and Central Air Conditioning Systems), By End Use Sector (Residential, Commercial Real Estate, Institutional, etc.) Competition Forecast & Opportunities, 2012 – 2022”, the HVAC market in India is growing on the back of focus on infrastructure projects, thriving middle class and expanding hospitality and tourism sectors in the country.

Engines of growth for India HVAC market

Along with the above-mentioned reasons, the change in weather condition is also coming up as a prime factor driving growth for the HVAC market in India. The northern region of the country is experiencing hot tropical weather for around 8-9 months in a year. The monsoon season in the northern states of Uttar Pradesh and Delhi is marred with humidity, leaving people with no choice but to use AC throughout the period beginning summers in March-April till Oct-November.

The extremities in climatic condition are coupled with rising disposable income and expanding infrastructure and real estate sectors. The latter is also the key factor for growth in the commercial AC market.

The government of India has well enforced its commitment to transform the state of infrastructure in India. Thousands of kilometers of roads and highways are under construction. Metro rail systems are expanding their networks in not just metro cities but tier 2 cities as well. Railways is undergoing a massive change while airports are also going through an exciting phase of development and renovation. Ports are not an exception.

Massive campaigns from the Indian government in foreign countries is resulting in global inflow of tourists, enabling growth in the hospitality and other tourism bound businesses. Naturally, it all adds up to the size of India HVAC market.

In another report by TechSci Research, United States HVAC Market By Product Type (Direct Expansion Systems and Central Air Conditioning Systems), By End Use Sector (Residential; Commercial Real Estate; Institutional; Marine & Offshore; Oil & Gas; Power and Others) Competition Forecast & Opportunities, 2016 – 2026, the market is expected to show a robust growth with an impressive CAGR in the forecast period, on the account of growing construction industry in the country. Favorable government policies are further boosting construction growth across all sectors. Construction industry generates demand from both public and private sectors, across residential, commercial and institutional markets, creating scope for all types of air conditioners. Hence, development of the construction industry has been propelling demand for all segments of air conditioners across the country. Moreover, factors such as rising GDP per capita, rapid urbanization, rising purchasing power of middle-class income group with encouraging government policies for existing as well as new market entrants, provide a conducive operating environment for the market players besides augmenting air conditioners demand in the country in upcoming five years.

Leading companies in India HVAC market

The India HVAC market is run by the following companies.

·         Voltas Limited

·         Daikin Airconditioning India Pvt. Ltd.

·         LG Electronics India Pvt. Ltd.

·         Johnson Controls-Hitachi Air Conditioning India Limited

·         Honeywell Automation India LTD.

·         Thermax Limited

·         Blue Star Ltd.

·         Samsung India Electronics Pvt. Ltd.

·         Carrier Airconditioning & Refrigeration Limited

·         ETA Engineering Pvt. Ltd

·         Panasonic India Pvt. Ltd.

The TechSci Research report profiles all the above companies in a detailed manner.

Recent Developments by Daikin India

In lieu, of the recent changes due to COVID-19, the economy growth in the country was disrupted at a large scale. But Daikin India is not withstanding the setback and has decided to move forward with the investment plans for a third manufacturing unit establishment in the country in the coming time. "Daikin is ready to take the advantage of PMP and remain committed to invest in the third manufacturing unit to augment local production capacity," was a comment from the internal sources at the company.

With the recent launches and a road map for the other market players in the Indian market, the company is expecting a tough competition, although it displays itself to be the first stone in the Air conditioning market of India. In May 2019, LG Electronics launched a new Dual Inverter Air Conditioner model “LG KS-Q18AWZD”. The product is launched with DualCool Inverter Compressor with the latest ISEER ratings and the highest cooling score of 5 with eco-friendly refrigerant R32. Daikin has laid the beginning of the technologically advanced air conditioners with dual inverter and automatic turn offs in the year 2019 and since then the advancements have not stopped since.

Impact of COVID-19 on India HVAC Market

With the imposed lockdown since March 2020, India suffered severe setback in the economy due to widespread COVID-19 viral infection. The India HVAC market is anticipated to outgrow the setback, but the current situation has affected the market drastically. Daikin on the other hand, refuses to backdown looking the current market scenarios and approximates that this setback is temporary, and their long term investment plan will aid the growth of the market in future years. With its plan for a local manufacturing unit in South India region, the giant is anticipating promoting the schemes of “Make In India” along with catering the needs of African market along with the Indian HVAC market. The internal reliable sources from the Daikin India confirm that their planning for local manufacturing will aid to their place in the market. Around 40 per cent 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 company, which has recorded a net sale of Rs 3,250 crore in FY19 along with a CAGR of 118 per cent, has invested around Rs 2,000 crore in India so far. With such figures and optimistic approach, the company still believes the market can be recovered once the pandemic subsides and buyers would start making further purchases.

In another research report by TechSci Research, “UK HVAC Market By Product Type (Direct Expansion Systems ((Split, Window, Duct able Split, VRF, Cassette and Others)) and Central Air Conditioning Systems (Chillers, Boilers, Cooling Towers, Air Handling Units, Fan Coil Units, HVAC Control System and Others)), By End Use Sector (Residential, Commercial Real Estate, Institutional, Marine & Offshore, and Others), By Region, By Company, Competition, Forecast & Opportunities, 2026”, the UK HVAC market is expected to record an esteemed growth in the upcoming forecast years until 2026 on the account of rising demand of the technologically advanced HVAC systems that can aid into reducing the energy consumption since that is a major issue in the country. Along with that, factors like increasing construction and infrastructure activities is further propelling the growth of the HVAC market in UK. Direct expansion systems are expected to dominate the market over central air conditioning systems owing to the demand of personalized cooling machinery requirement by the consumers in the country. Demand for the split HVAC system is expected to increase in the future due to the great flexibility, easy installation, and low energy consumption.