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42 firms selected under PLI scheme for white goods

The government on Wednesday said 42 firms, including Daikin,

Panasonic

, Syska and

Havells

, with committed investment of Rs 4,614 crore have been provisionally selected as beneficiaries under the production linked incentive (PLI) scheme for the white goods sector. A total of 52 companies had filed applications with committed investment of Rs 5,858 crore under the scheme.

The scheme will be implemented over a seven-year period from 2021-22 to 2028-29 and has an outlay of Rs 6,238 crore, which was approved by the Cabinet.

“Total 52 companies filed their application with committed investment of Rs 5,858 crore under the PLI scheme.

“After evaluation of all the applications, 42 applicants with committed investment of Rs 4,614 crore have been provisionally selected as beneficiaries under the PLI scheme,” the commerce and industry ministry said in a statement.

The selected applicants include 26 for air conditioner manufacturing with committed investments of Rs 3,898 crore and 16 for LED Lights with committed investments of Rs 716 crore.

Six applicants proposing FDI from countries sharing land border with India have been advised to submit their applications for approval, it added.

Further, four applicants have been referred to the Committee of Experts (CoE) for examination.

It added that the approved investments of Rs 4,614 crore are likely to generate net incremental production of around Rs 81,254 crore and direct employment for about 44,000 people.

“The investments in Air Conditioners will lead to manufacturing components across the complete value chain including components which are not manufactured in India with sufficient quantity,” it said.

At present, there is insignificant manufacturing of certain high value components of ACs like compressors, copper tubing and aluminium stock for foils.

Many other components like control assemblies for indoor units (IDU) or outdoor units (ODU), display units, brushless direct current motors and valves are not manufactured in enough quantity.

“All these components will now be manufactured in India in significant quantities. Similarly, LED Chip packaging, LED Drivers, LED Engines, LED Light Management Systems, PCBs including metal clad PCBs and Wire wound inductors etc. will be manufactured in India in high quantities,” it said.

Applicants provisionally selected include Daikin Airconditioning India, Amber Enterprises India Ltd, PG Technoplast, Hindalco Industries, Mettube India, Blue Star Climatech, Havells India, Johnson Controls Hitachi Air Conditioning India Ltd, Voltas, IFB Industries, Dixon Devices, Panasonic India, Syska LED Lights and Haier Appliances (India) Ltd.

AC makers bet on smaller cities for growth this summer

NEW DELHI: With summer round the corner, air conditioner makers are gearing up to introduce products with focus on energy efficiency as they expect tier II and III cities to drive growth.

Firms like LG,

Voltas

, Carrier Midea, Daikin,

Blue Star

and Panasonic are confident that their sales will grow in double-digits this summer despite unseasonal rains in North India delaying onset of the warm season.

The industry, however, is concerned that price hike after the rollback of excise duty benefits and higher certification norms by Bureau of Energy Efficiency could hurt demand.

“For the current fiscal year 2014-15, the (AC) market size will stand at 3.4 million units, with a growth rate of 7 per cent. The production for FY15-16 is projected at 3.7 million units, accounting to a turnover of Rs 8,000 crore,” Consumer Electronics and Appliances Manufacturers Association (CEAMA) President Manish Sharma told PTI.

In the ongoing fiscal, the total AC market in India is expected to be around Rs 7,400 crore.

According to Refrigeration and Air Conditioning Manufacturers Association (RAMA), the industry is hopeful that this season will be better than last, even though there has been a temporary setback due to rains in March.

“The industry is hopeful and expects the market to grow at a steady rate of 8 to 10 per cent on account of higher disposable income, rise in economic sentiment, positive consumer confidence,” RAMA President Krishna Sachdev said.

He, however, added that “rollback of excise duty extension has impacted the industry costs due to which many players have increased prices marginally”.

Yet, companies are hopeful that after two years of sluggish demand, they will gain sales momentum this season.

South Korean firm LG, which is aiming sales of Rs 2,800 crore with up to 25 per cent growth this season, has lined up inverter AC along with ‘mosquito away’ technology.

“Sales from tier II and III cities is picking up and this year we expect 40 per cent of our sales to come from towns below 10 lakh population,” said LG India Business Head Air Conditioners Saurabh Baishakhia.

He said LG will spend around Rs 50 crore this season on marketing of ACs and will run promotion schemes, including finance options and EMI.

Similarly, Panasonic which has lined up more than 50 models during the season, is expecting sales in smaller cities to grow as much as in metros.

“Owing to the increase in demand for air conditioners and the launch of our new Smart Life conditioners, we expect growth in this segment across metro and tier II and tier III markets,” said Panasonic India Managing Director Manish Sharma.

AC market to witness price war as MNCs enter mass segment

KOLKATA: Competition is going to heat up in the air-conditioner market next year as several of the MNC brands who were earlier in the premium segment are now entering into the mass category which may lead to a price war, multiple brokerage reports said.

As per the reports, brands like Daikin and

Hitachi

have started to enter into the mass-market AC segment with pricing as their weapon. Samsung too has recently indicated its intention to enter this category and re-enter window and lower priced non-inverter models.

“Room AC is the most competitive white goods category with presence of more than 50 players. The industry currently faces stiff competition, which is why it even restricted price increases in one of the strong summers in the first half of FY20,” said a report by Emkay Global.

The report said despite strong industry growth and low channel inventory, AC prices this month further dropped by around 1% from the low levels of April 2019.

Brands like Blue Star and

Lloyd

have cut prices of 1.5 ton 3-star fixed-speed AC by 5% and 3% this month, it said. Prices of most selling models such as 1.5 ton 3-star inverter AC had reduced by 11% from July 2018 to April 2019, the report noted.

As per a report by ICICI Securities, the entry of premium brands into mass segment will narrow the price gap with leading brands like Voltas.

Voltas

is the market leader in the room AC segment. The re-entry of Samsung and other brands will restrict Voltas from increasing prices, it said.

Samsung India’s AC business chief Rajeev Bhutani recently told ET that the company has set a target to become market leader in AC market by 2022 and double business in the next two years. The company will have an aggressive pricing strategy to regain back the market share it had lost in last four years when it had vacated the mass product segments and now want to re-enter.

Motilal Oswal in its report said there is a long tail of AC brands and Samsung may be able to gain market share at the cost of these fringe players in the near term.

Refrigerator and washing machine are relatively high-competition segments as compared to room AC. In refrigerator and washing machine, the top three brands contribute around 80% of the market share while in room AC the top eight brands contribute about 75% of the market.

Heatwave spurs AC sales after a slow start of summer

NEW DELHI: As heatwave sweeps across the country, sale of air conditioners has finally started picking up after a slow start because heavy rains had kept the summer temperatures low initially.

Manufacturers like Godrej,

Voltas

, Daikin and Videocon are witnessing a pick up in AC demand as the mercury hovers above 40 degrees Celsius in many parts of India.

“As the heat wave is continuing, we are definitely seeing increase in sales of ACs and refrigerators,” Godrej Appliances Executive Vice President, Sales & Marketing, Kamal Nandi told PTI.

The first 15 days of May were not very encouraging in terms of sales as there were rains, he said.

“However, in the last 10 days temperature has gone up. It is influencing customers to buy cooling products,” Nandi said, adding that in May the company has registered over 30 per cent growth in terms of value.

Daikin Airconditioning India’s Managing Director Kanwal Jeet Jawa said: “Sales are picking up in May and the industry is selling whatsoever is available although they were not expecting it to happen. Sales of the industry would grow between 12 to 16 per in April and May.”

Voltas President and COO Pradeep Bakshi said AC sales picked up this year late due to factors such as hail storms and rains.

“The market was affected as over all 50 per cent of sales comes from the Northern region. In April the growth was in single digit but in May volume growth was up to 20 per cent,” Bakshi said, adding “our water cooler segment has also picked up in May although we have ventured in this segment recently”.

Videocon Industries COO (Air Conditioner) Sanjeev Bakshi the company’s sales grew 68 per cent in April and sales in May were also good.

Industry body CEAMA Secretary General Amit Chadha hoped that in the coming days demand of ACs would increase.

“Sales of ACs in April was low due to unseasonal rains and we are expecting that it will pick up in May as the temperature has increased,” Chadha said.

The nationwide death toll had crossed 2,000 last week as the intense heatwave continued to sweep many parts of the country.

AC prices to go up by 5 per cent due to customs duty hike, rise in logistics cost amid Coronavirus scare

NEW DELHI: Season for air-condition sales is going to start soon, and the sector is bracing for a hike of up to 5 per cent, amid combined impact of customs duty hike on compressors and increased logistics costs due to Coronavirus outbreak in China, which is the main supplier. Amid Coronavirus scare, several manufacturers expect 2020 to be a challenging year for the industry as they are going to airlift component such as controllers, compressors and other materials from China, Thailand and Malaysia and the increased logistic cost would put pressure on input costs.

According to some makers, the crisis “unfortunately” has come at a critical time, when April-June season is knocking, during which the industry accounts around 40 to 45 per cent sale of residential airconditioners.

“There is a shortage due to Coronavirus and in order to keep the production up, we are airlifting the critical components from China. There is also an increase in customs duty on compressors and others,”

Blue Star

Managing Director B Thiagarajan told .

Blue Star, an air conditioning and commercial refrigeration company, has already increased prices by 3 to 5 per cent on various items.

“This is not only because of Coronavirus. We have to airlift some components. There is an increase in custom duty and ocean freight also,” he said.

According to Daikin India MD & CEO KJ Jawa, most of the Indian companies are “strongly dependent” on China not only for compressors but also for other components as controllers etc.

“I am expecting that prices are going to go up by 3 to 5 per cent with immediate effect. It might go further up if the situation does not improve. Most of the people are importing from Thailand or Malaysia,” said Jawa adding that Daikin has already increased price, effective from March and has plans to review it further if the condition does not improve.

Though production has been started by some of the vendors, but it would take time as they require several clearances from the Chinese government as well from the Indian authorities and would not be easy and “unfortunately the critical period for the AC industry is March to June.”

“This is unfortunate but what else one can do about it,” he said, adding “this will definitely affect the revenue and profitability in the short run of the industry.”

While presenting the budget, Finance Minister Nirmala Sitharaman had proposed to hike the basic customs duty to 12.5 per cent from 10 per cent on compressor of refrigerator and air conditioner.

In a residential AC, compressor and motor, which account for around 30 per cent of the price are imported, while sheet metal, coils and other are sourced locally.

Voltas, a leading player in the segment, is also revisiting its prices as it is also feeling the heat of disruption of supply.

“In short term, there could be a shortage, therefore people may be looking for some opportunity to increase the price. Besides duties of the some of the components has also gone up. Putting both things together would have some impact on the pricing and industry is looking to increase it,” said Voltas MD & CEO Pradeep Bakshi.

“We would also have to revisit our pricing. Still we are calculating as what kind of impact would happen, but surely there would be some increase,” he said adding “it could happen around 2-3 per cent. If the raw material is delayed further then surely it would be more.’

However, on being asked that as whether it would impact the sales, Bakshi said that the hike would be around Rs 700 and this would not deter the customers to buy AC in summers.

Godrej Appliances AVP, Product Group Head-Air Conditioners Santosh Salian said “over all for the end customers, the increase would be 3 to 5 per cent.”

Production of components is hugely delayed in China and there is a disruption of the entire schedule due to Coronavirus, leading to an increase in ocean freight charges due to the challenging situations for shipments arising out of the outbreak.

“If there is a disruption in the schedule, you did not get container at the same time. There is a peak load of demand of containers, this is going to happen and it would push the cost of ocean freight further,” Salian said.

Panasonic

India President & CEO Manish Sharma said the company is also watching the situation and may consider airlift for the critical components to maintain inventory level.

According to him, there is sufficient inventory for February and March but the situation extends beyond that then it may have to airlift as ocean freight would take two to three weeks time to reach.

The Indian room AC industry market is expected to be around 4.5 million units with more than 20 companies competing in the space.

Daikin India eyes USD 1 billion turnover in two years

NEW DELHI: Air conditioner maker Daikin India is aiming to be a USD one billion (Rs 6,500 crore) brand in India in next two years, led by high double digit growth in domestic markets, addition of new products and increase in exports, said the top company official.

Besides, Daikin is planning to have another plant in South India in the next four years to catch up the growing AC market. It will invest around Rs 600 crore in the plant.

In November 2017, Daikin commenced operations at the second factory in Neemrana, Rajasthan, in which the company has invested around Rs 750 crore.

“We would be a billion dollar company by 2019-20. To achieve it, we will grow at the rate of 20-22 per cent,” Daikin India Managing Director & CEO Kanwal Jeet Jawa told PTI.

The company has a turnover of Rs 3,250 crore in 2016- 17 and expects to cross Rs 4,000 crore in the current fiscal, as it has witnessed around 20 per cent value growth in the last three quarters.

According to him, Daikin’s growth would be coupled with exports, persification and new business streams. Commercial refrigeration will further contribute to the growth.

The company is aiming to sell more than 10 lakh units of AC in 2019 and become a leader in the Indian HVAC (heating, ventilation, and air conditioning) segment.

“The growth areas will continue to be tier II & III cities. Indian’s AC sales which stood at 4 million units in 2015-16 are expected to rise to 7 million by 2019-20,” the company said.

Presently, up to 70 per cent sales of Daikin Air Conditioning India, a 100 per cent subsidiary of Japan-based Daikin Industries, come from room ACs and rest from VRV and chiller segments.

It has the capacity to manufacture 15 lakh room ACs, 50,000 VRV units, 1 lakh cassette units, 20,000 ductable units and 1,000 chillers.

“This capacity would serve us till next 3-4 years only. We would have to make our next plant in South operational by 2022,” he said adding the company will soon decide on the location for the plant.

Daikin today launched the latest version of its VRV (variant refrigerant volume) – VRV X- targeting big homes and flats. VRV is normally used in offices and commercial places for cooling.

Besides Indian market, Daikin is also looking to boost exports, although its first priority would be to cater the domestic segment.

“We have started exports to Sri Lanka, Bangladesh, Nepal and South Africa. Now, we have additional production capacity, so we would scout for more markets,” Jawa added.

Exports contribute less than five per cent in Daikin India’s total sales but the company expects it to go up in the coming years.

The company has invested over Rs 2,000 crore so far in its Indian operations.

Evergrande woes hit Japan’s toilet, air-conditioner and paint manufacturers

Concern that China Evergrande may default on its mountain of debt hit shares of toilet maker Toto and other Japanese firms that are seen vulnerable to a further slowdown in China’s property development.

Toto lost 6.1 % on Tuesday, extending its fall since Thursday to 14.8%, on the perceived risk of exposure to Evergrande, which investors fear could miss debt payment later this week.

“There are rising and widely reported concerns about fund flows at leading local developer China Evergrande Group, whose business scale suggests to us it is very likely one of TOTO’s major customers,” said Arisa Katsuyama, analyst at Morgan Stanley.

“Year-to-date debt defaults by real estate companies in China, not just China Evergrande, already exceed the cumulative figure for the past 10 years as tighter regulations bite,” she said, adding investors should bear in mind the risk Toto may have to book loan loss reserves.

China accounted for about 30% of Toto’s profit last year but the firm’s spokesperson said it could not comment on specific transactions including whether it has deals with Evergrande.

Other potential suppliers to Chinese house builders and constructors were also caught in the melee, with air-conditioner manufacturer Daikin losing 4.7%.

Almost a quarter of Daikin’s air-conditioner sales came from China in the last financial year, compared with 13-16% in previous years.

Paint maker Nippon Paint Holding, for which China is by far the largest market, slid 7.5%.

Manufacturers of construction machines, which have long benefited from the construction boom in China, also suffered, with Komatsu losing 5.4% and

Hitachi

Construction Machinery shedding 5.5%.

Investors also dumped SoftBank Group, a big investor in Alibaba and other Chinese tech firms, on fears Beijing will continue to tighten its grip on them.

SoftBank Group shares lost 5.0% as U.S.-listed Alibaba shares hit a two-year low on Monday.

Tomoichiro Kubota, senior strategist at Matsui Securities, said the damage could spread to more companies if China’s slowdown becomes more evident.

“It looks like Chinese authorities are clamping down on outright lavishness, which seems to have support from the Chinese public. That has some resemblance to Japan’s post-bubble era, when expensive house prices were considered bad for ordinary people.”

While many Japanese firms rely on Chinese demand, Japanese institutional investors have relatively limited exposure to Chinese assets.

Japan’s biggest investor, Government Pension Investment Fund (GPIF), had exposure of 9.673 billion yen ($88.31 million) to Evergrande as of March, 5.9 billion yen in bonds and 3.7 billion yen in stocks, out of its 186.1 trillion yen ($1.70 trillion) assets.