Global firm Johnson Controls-Hitachi Air Conditioning, formed in October 2015, is the third-largest player in India. While prices of ACs are set to rise under goods and services tax (GST), chief executive officer Franz Cerwinka tells Arnab Dutta that clarity is required to allay fears of trade partners soon. Edited excerpts:
How important India is and where do you plan to be by 2020?
Not in every market around the world you manage to post 20 per cent yearly growth, which we have achieved here. So, we are happy with our results last year. Our revenue is $300 million (Rs 2,153 crore) in India, which is roughly 12 per cent of our global revenue. China is our largest market, followed by Japan, and India is the fourth-largest market for us. This is one of the most attractive markets for growth as penetration of air conditioners is still very low. Hopefully, by 2020, we will be the number two player with the number one position in sight.
What is your assessment on the impact of GST as AC prices are set to rise?
The mood is low among trade partners and several meetings have taken place between the management team and partners. Unfortunately, there are more questions than answers. Hopefully, there will be more clarity in the next two weeks. I believe the impact is going to be temporary for our kinds of businesses, where prices are set to rise. Consumers have to adapt to the change in prices across the spectrum, with some goods getting cheaper and some dearer.
Hitachi focuses on energy efficiency but is considered premium. How does it plan to grow further in a price-sensitive market?
We have one of the most energy-efficient products in the market and it remains one of our main focus areas. However, not everyone in the market is willing to pay more for high energy-efficient air conditioners. So, our portfolio should be broad enough to cater to all types of consumers. India is a low-end focused market but we don’t want to get in that. But disposable income is growing and there is potential for explosion in number of middle-income households. So, the market is going to expand very rapidly and we want to be at the best position to leverage that. We are trying to attack the mid-segment of the market as we believe it’s a sweet spot for our brand. We do not be seen as a premium brand for a few.
What are your plans for stretching your foothold here?
We have opened an engineering excellence centre here on Tuesday and will be setting up product development centres, more training centres and testing labs here. Our investments will be in the tune of tens of millions of dollar over the next four years.