Daikin to set up Rs 1,000-crore AC manufacturing plant in Andhra Pradesh

First firm to acquire land for a new factory under the PLI scheme for white goods

Japanese air conditioning major Daikin has become the first company to acquire land for a new factory under the production-linked incentive (PLI) scheme for white goods.

The India unit of the multinational, Daikin India, on Friday finished the purchase agreement for a 75-acre plant at Sri City (Andhra Pradesh) to set up a large air-conditioner (AC) manufacturing plant, which will come up in phases. Internal estimates suggested that Daikin would have to invest Rs 1,000 crore in the first phase.

The plant, expected to start operations from 2023, will have a total capacity of 1.5 million units per year and may create up to 3,000 jobs. It will serve both domestic and international markets.

“Daikin wants to make India its manufacturing hub to serve markets such as West Asia, Sri Lanka, South America, and Africa," the company said.

According to industry sources, Daikin has so far invested over Rs 2,000 crore in India to set up its two factories and a research and development (R&D) centre at Neemrana, Rajasthan.

The company said the new plant would be under the PLI scheme for ACs, for which it had already applied.

Apart from finished AC units, it plans to manufacture key AC components that the government is aggressively pushing for. Currently, 75 per cent of the AC components (by value) used in India are imported from China, Taiwan, and Vietnam.

Daikin plans to export ACs once the third plant comes up. With the penetration of ACs being the lowest — at 5-6 per cent of the Indian households — compared to other large appliances, domestic demand has been growing in healthy double-digits in recent years (except in 2020).

“For the AC segment, as a strategy, we are increasing our focus on markets that are witnessing rapid growth. India is the fastest-growing market for us. Daikin has a very clear strategic intent to enhance its air conditioning, air filtrations, and refrigeration portfolio, for which India has been identified as a developmental hub. We believe India has the potential to become our offshore delivery centre for R&D and exports,” said Kanwal Jeet Jawa, chairman and managing director at Daikin India.