In a bid to make its Indian subsidiary a regional export hub for air-conditioners, LG Electronics is in the process of implementing a "cluster" strategy at its upcoming facility located in Pune, India.
The company has component supply firms, both Korean and Indian, setting up units at the premises of LG's Pune plant, Hwan-Yong Nho, Executive Vice-President (Air-conditioning Division), LG Electronics (Korea), said in an interview.
"Our objective is to make a cluster of sorts," he said. "Our total production of air-conditioners in India will cross 1 million units this year. Apart from catering to domestic demand, LG Electronics will export primarily to West Asia and Africa. We are also studying the possibility of exporting to the South American markets."
Mr. Nho added that though the cost of production in China is lesser than in India due to cheaper availability of raw materials there, this difference would narrow down over the next few years. He said that LG would work with Korean steel major Posco (which recently announced its investment plans for India) in the country, which would help in the efficient sourcing of raw materials.
LG Electronics is also bullish about the growth potential of air-conditioners in the Indian market and has identified India along with China and Brazil as a key growth market that would drive sales of its air-conditioners.
"The potential here is immense, with the penetration of room air-conditioners only about 1.3 percent. The market here has been growing at roughly 30 percent per annum, and this is accompanied with overall economic growth," Mr. Nho said.
At the same time, with the boom being seen in the construction and infrastructure sectors, LG is also focusing on the commercial air-conditioner segment in India and expects a significant chunk of sales to come from the commercial segment in the coming years.
At present, commercial air-conditioners account for less than 30 percent of total sales, but this number could reach 50 percent in 2 to 3 years, Mr. Nho said.
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