India will be one of our top 3 markets by 2021: Franz Cerwinka

Interview with CEO, Johnson Controls-Hitachi Air Conditioning

The Rs 614,000-crore Hitachi Ltd., a global conglomerate went into a joint venture (JV) agreement in January 2015 with US-based technology and industrial major Johnson Controls for its air conditioning business. The deal, in which Johnson Controls holds 60 per cent stakes, was aimed at giving its AC business a global push. Franz Cerwinka, CEO, Johnson Controls-Hitachi Air Conditioning, talks with Arnab Dutta on the new approach and future plans of the JV. Edited excerpts:

Has Hitachi's approach regarding product and pricing changed in India? Given Hitachi ACs are in the higher price bracket, don't you think it will be tough to gain market share here?

I don't see any issue with our pricing strategy, although I agree our focus remained on products that are priced a bit higher. But we are the number three player in the Indian AC market and have 11 per cent share in the home air conditioning segment. So, according to us, our strategy is well-suited for India.

Our expectations are higher now. We have introduced a full range of premium energy-efficient ACs which will expand our portfolio further and we aim to hold 20 per cent of the market by 2020 and become one of the top two players in the country.

How does the JV affect dynamics in India for Hitachi?

The direct benefit of the JV is that now we have a lot more products and even bigger customer base across the globe. Channels to offer our products have also gone up. India certainly poses great potential to grow as a market, as penetration of ACs is very low compared to the global average.

By leveraging the strengths of both the companies, we will maximise our synergy and competitiveness to drive sustainable growth as a leading air conditioning company in India and in the world.

In a competitive yet expanding market like India, you need to strengthen your position for long-term growth. What is your plan?

We are the only company that manufactures compressors in India and we are in discussion on how to ramp up production capacity and about required investments to do so. By the end of 2016, our capacity will be two million units a year. We already supply a majority of our compressors made here to other AC manufacturers in India. In the last two years, we have invested Rs 150 crore to expand and optimise our capacity. Our brand and marketing spend is 2.5 to three per cent of our sales here, which is in line with our long-term strategy for India.

How important is India among your global markets?

India is 10 per cent of our total business and among the top 10 players for us. But the more important factor that excites me is that the Indian market is quite small now, but growing at a much faster rate than most others. We expect India to become one of the top three markets globally for JCH by 2021.