March 1, 2024

Daikin Takes on the Challenge of Conquering the Southern Hemisphere

Brett -

Daikin Industries, the world's leading air conditioning company, has launched a strategy to capture the "Global South," including Africa. They have grown through energy-saving technologies and skillful mergers and acquisitions (M&A). Still, in the southern hemisphere, where there are many vacant lands, they face head-to-head competition from Chinese manufacturers specializing in low-priced models. Daikin, which will celebrate its 100th anniversary in October 2024, will hone its cost competitiveness in India and move on to the next growth stage.

The Indian air conditioning market is expanding rapidly. According to the Japan Refrigeration and Air Conditioning Industry Association, the Indian residential air conditioning market will reach 7.4 million units in 2022, up 70% in two years. Daikin, which entered the market in 2000, is the leading manufacturer, with a 60% share of the commercial market and a 20% share of the residential market. With the Sri City Factory coming on stream and annual production in the range of 3 million units, President Masanori Togawa is thinking of "Establishing a 5 million unit structure" for the third plant.

Daikin's rush to increase capacity in India is also due to "Creating an Ecosystem for the Global South"(President of Indian subsidiary Kanwal Jeet Jawa). It aims to promote local procurement of materials and parts in India and develop it into an African export hub.

In August 2023, "knockdown" production began at the agency's Nigerian hub in central Africa. Parts are transported from India to assemble compressors and heat exchangers. Preparations are underway to open a hub in northern Africa as well. The engineers trained in India are leading the production of technology in Nigeria. In the Global South, the strategy is drawn with India as the nucleus, not Japan, regarding people and goods.

Consolidated sales, which were approximately 370 billion yen in the fiscal year ending March 1994, are expected to increase 11-fold to 4.24 trillion yen in the fiscal year ending March 2024. The ratio of overseas sales, which was about 15%, now exceeds 80%. Net income for the current fiscal year is expected to reach 264 billion yen, the highest in three consecutive years. While the Japanese economy spent "the lost 30 years," Daikin has grown by globalizing production and sales.

Will Daikin be able to create market rules and capture growth in the Global South? A new challenge has begun.