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india: LG to invest Rs 300 crore to manufacture air-conditioner components in India

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LG Electronics India has invested about Rs 300 crore on components for air-conditioners, including Rs 100 crore for manufacturing of compressors, as part of the production linked incentive (PLI) programme of the government. This makes LG the first brand to manufacture its own compressors in India.

This investment into component eco-system has ensured that over 65% of LG’s ACs made in India are from parts locally sourced as compared 40-45% even a few months back. LG on Monday launched the compressor plant at its Greater Noida manufacturing hub where it will make dual inverter compressors. The plant will have an annual production capacity of over one million units. It already makes other parts like condensers and evaporators as part of the PLI programme.

“The entire investment of Rs 300 crore under PLI scheme is going to be completed now with the compressor plant,” said Kulbhushan Bhardwaj, business head of AC, LG India.

“We were earlier importing the compressors from our plant in Thailand. Right now, LG will manufacture for the Indian operations but as we scale up the plant we will export to other LG operations and could even sell compressors to other brands,” he said. At present, there are a couple of specialized MNC compressor manufacturers in India such as GMCC and Highly.

Hyunjin Lee, managing director for manufacturing at LG India, said the company is aligned with the government’s make in India initiative. As part of that, LG has recently started manufacturing side-by-side refrigerators at the Pune plant and now the compressor plant which will go a long way to make India a manufacturing hub, he said.

Air-conditioners account for 20-25% of LG India’s revenues and the company enjoys around 22% market share. Last calendar year the company had sold 1.2 million units while this year it wants to sell 1.5 million units. However, unseasonal rains in the last ten days has impacted sales. But Bhardwaj expects a pick-up in sales in April-June which will wipe out the deficit this month. April-June accounts for almost 60% of annual sales of air-conditioners in India.

As of 2022, fixed speed air-conditioners have shrunk to 10% of the market while inverter air-conditioners are 90% of the market. LG had exited fixed speed air-conditioners in 2017. This year, the fixed speed market is estimated to further shrink to 5% of the total market. Amongst air-conditioner types, window AC is 10% of the market while balance 90% is split AC.

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