Daikin to apply Asian business strategy to sell air conditioners in Africa

A worker at Daikin's factory at Neemrana in the northern Indian state of Rajasthan. The company has invested 20 billion rupees in India to set up its research and development facility and two factories at Neemrana. (Photo: Daikin Airconditioning India Pvt. Ltd.)

By Atul Ranjan

NEW DELHI – Japan’s Daikin Industries Ltd., the world’s largest air conditioner maker, is setting up a regional office in the Kenyan capital Nairobi, using its Asian expertise to cultivate the East African market.

“We are in the process of setting up our office in Nairobi, which will essentially cater to East African countries such as Mauritius, Seychelles, Tanzania and Rwanda,” Kanwal Jeet Jawa, regional general manager of Daikin’s AC business for India and East Africa, told NNA in an interview earlier this month.

Daikin has appointed nine dealers in Kenya and plans to set up skill development centers there, Jawa said.

Jawa, who is also the CEO of Daikin Airconditioning India Pvt. Ltd., said that the Indian subsidiary has been tasked with overseeing Daikin’s expansion plans in East Africa to help replicate its success in India.

Daikin built its presence in Asia and other emerging markets by selling lower-priced home air-conditioning units and keeping costs down, while its strength in major economies comes from sales of systems for office and commercial use.

The company will focus on the East African region initially to increase its sales and service network in a bid to expand its footprint “aggressively” in the African market, which accounts for less than 1 percent of its global sales, he said.

“The other African markets will be catered for by exporting units through our Middle East-based office,” Jawa said.

Daikin has no plans to build a factory in Africa at this point, said Daisuke Kakinaga, a spokesman in Tokyo. The company has offices in Egypt and South Africa.

Daikin’s Indian subsidiary began local production 10 years ago. It has since seen its revenue grow nearly 10 times to 42.5 billion rupees ($614 million) in the year ended March 31 from 4.4 billion rupees in fiscal 2009. It supplies domestically and ships to Sri Lanka and Bangladesh.

Daikin India had an 11 percent market share in the room air conditioner segment in India last year, according to Motilal Oswal Securities Ltd.

The Indian subsidiary aims to achieve a turnover of $1billion, with plans to expand its dealerships from the current 7,000 to 10,000 in the next two years, according to Jawa.

Daikin also plans to make India one of its manufacturing hubs to serve both domestic and international markets including Africa, he said, adding that it plans to build its third factory in India.

The company has invested 20 billion rupees in India setting up a research and development facility and two factories at Neemrana in the northern state of Rajasthan with capacity to produce over 1.2 million air conditioners, 50,000 VRVs (variable refrigerant volume) and over 1,000 chillers annually.

According to Motilal Oswal Securities, the air conditioner market in India stands at four million units annually, which is expected to grow 15 to 20 percent a year over the next decade on easy availability of consumer financing and improved electricity supplies.

Daikin estimates its global current profit at 268 billion yen ($2.4 billion) on sales of 2.48 trillion yen in the year to March 31, 2019, up from 255 billion yen on 2.29 trillion yen of revenue in the previous year, according to its website.

NNA Report