Neemrana, some 120 kilometres from Delhi, is perhaps best known for its for its fifteenth-century fort-palace, a popular getaway for Delhiites.
Less well known is the town's industrial area, established by the Rajasthan State Industrial Development and Investment Corporation (RIICO), home to air conditioner maker Daikin's factory.
On its 40-acre campus, where the Japanese company already manufactured commercial air conditioners and chillers, it added its domestic air conditioner assembly lines seven months ago. The factory makes an average of 1,000 ACs daily, and has an annual capacity of half a million units.
In the past year, manpower here has almost doubled. Pradeep Sharma, Assistant Manager for production at the plant, says the Neemrana factory is a replica of Daikin's state-of-the-art facility in Thailand.
After it entered India in 2000, Daikin was far behind its peers in domestic AC sales, because of higher price points and import-related limitations (Daikin imported domestic ACs into India), but things are looking up.
Today, it is India's No. 3 AC maker after LG
and Voltas, with a 12 to 12.5 per cent market share in split ACs. Once, the top two positions were dominated by Korean giants LG and Samsung.
"Koreans are not even one-third of our turnover in air conditioners," says Kanwal Jeet Jawa, Managing Director of Daikin Airconditioning India, who has spent almost three decades in the heating and cooling business.
In May 2010, Jawa recalls, a huge consignment of ACs imported from Thailand got stuck in customs. Daikin was on an expansion spree at the time, so as soon as the shipment was cleared, Jawa had the entire lot of ACs air-lifted to their destinations.
"It cost us a bomb, but we did not want to lose dealer sentiment," he says.
Manufacturing in India will not only help Daikin avoid such problems, but also reduce manufacturing costs, as these are 15 to 20 per cent lower in India than in Japan.
To further reduce costs, Jawa is working on a localising strategy. At present, 30 to 35 per cent of AC components are procured locally, and the rest are imported. The strategy is to flip the ratio, although Jawa does not give a time frame for this.
In 2009, Daikin ACs sold for around 40 per cent more than their current price. The company reckoned that it had to slash prices to become mainstream. It launched a series of products priced at around Rs 24,000. In 2011, its India revenue doubled to Rs 600 crore. Today, Daikin's revenue in India is Rs 1,800 crore*.
Arvind Singhal, Chairman of consultancy Technopak Advisors, says: "In the last two years, the Japanese have really made a comeback in the Indian market."
For Jawa, it's just the beginning. By 2015, he wants Daikin to be the top AC maker in the country. To do this, Daikin will have to compete with cheaper products from its rivals in non-metro markets.
But Jawa is not worried. "We cost 10 to 15 per cent more than the Koreans, and we can justify that to our customers," he says.
Assistant Manager Sharma points out that the Neemrana factory has two assembly lines for domestic ACs - one for wall-mounted units and the other for outdoor units. Wall-mounted ACs have 29 stages of production, while the outdoor ones have 33 stages. After manufacturing is complete, and before the units are packed, two machines are checked at random from every batch of 50. If a fault is detected, the 10 machines before and after the faulty machine's serial number are also checked.
Many analysts agree that cost is not all that matters.
"You can have premium goods, but going into the mass market has to be strategic," says Mrityunjay Kapur, Managing Director of Protiviti Consulting.
For the first time, Daikin is also looking at tying up with organised retail chains such as Croma, to increase its retail presence. In the next couple of years, Jawa says, Daikin will grow at 15 to 20 per cent - faster than the AC market, which he says will grow at 12 per cent. He says a combination of quality, retail presence and manufacturing prowess will help Daikin win customers.
"There is not one single solution (to grow), and you need to keep charging," he says.
*An earlier version of this story had incorrectly mentioned India revenues at Rs 18,000 crore. The error is regretted.