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Business trends

Daikin and Panasonic turn up Asia's air conditioning battle

Japanese brands strengthen sales and services challenging cheaper Chinese rivals

Daikin plans to increase its store count in Indonesia to 1,200 by fiscal 2020.

OSAKA -- Japanese air conditioner manufacturers are expanding sales networks in Asia, seeking to fend off low-cost competitors from China.

Daikin Industries aims to protect its turf in Indonesia, where it boasts a 20% market share for household air conditioners. It plans to increase its store count in the country 20% to 1,200 by fiscal 2020. Current locations are concentrated in the Jakarta area, so the expansion will target rural parts of the country.

"We will dispatch staff from Japan who will manage vendor development," said Yoshihiro Mineno, a senior executive officer at Daikin.

Daikin plans to roll out air conditioners considered reasonably priced by customers, such as products using energy-saving inverters.

Only about 20% of Indonesian households own air conditioners. But this market is expected to grow to 2.6 million units in 2020, up 20% from 2017, as the country's middle class expands.

Japan-based players Daikin, Panasonic and Sharp hold a combined 50% share of Indonesia's household air conditioner market. But Gree Electric Appliances and other Chinese rivals are catching up.

Daikin's current lineup includes mass-market models priced around $270, while Chinese options sell for about $180. In an effort to differentiate itself from rivals, Daikin will bolster installation and repair services. The Osaka-based company anticipates Indonesia revenue growing 40% from this financial year's forecast to 50 billion yen ($450 million) in fiscal 2020.

In China, Panasonic established a sales company in Suzhou to handle large air conditioning systems for condominiums and office buildings. The 200-plus sales agents spread across the country will work from the new offices. The company will also set up in Suzhou a housing company as well as a showroom targeting air conditioning equipment sellers.

In addition, Panasonic will move development of large cooling systems from Japan to Suzhou. That way, sales will be better connected to development, and the company can quickly introduce products that match local needs.

In Chinese urban centers, large systems installed in ceilings and connected to room vents have taken off, especially at newly constructed condos. That type of air conditioning system is favored among the affluent due to their preference for neatly designed rooms. The Chinese market will grow to about 50 billion yuan ($7.27 billion) in 2020, or double its size in 2013, according to one estimate.

For a standard large system cooling a five-room condo, the market rate is about $4,500 not including installation fees. Because Midea Group and other low-priced Chinese players have already established themselves at home, Panasonic's share in the country is estimated at less than 10%. The bulk of Panasonic's business in China consists of smaller household models. Panasonic's lineup of large air conditioning systems is thin, so it has not caught on with Chinese homebuilders.

But the Osaka-based company says it will quadruple or quintuple sales in China in the next three years by adding value with energy-saving and deodorization functions. "Even though we came late, we can win against the Chinese with our technological capabilities," said Tsutomu Ishihara, head of Panasonic's large-air-conditioner business.

Last year, global demand for air conditioners rose 8% to 110 million units, according to the Japan Refrigeration and Air Conditioning Industry Association. Demand in China, the biggest market, jumped 13%, while that in Asia outside Japan and China climbed 5%.

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