‘India Is Definitely One Of Hottest Business Destinations In World Today’
A global leader in the field of automation and other related activities, Mitsubishi has a footprint across 80 countries. Its Indian arm Mitsubishi Electric India has a substantial turnover. Since the onset of its operations in India in the 1920s, Mitsubishi Electric has slowly set its foot in the Indian market by offering a wide range of pioneering and high-quality products. Mitsubishi Electric was first brand to introduce 5 star rated products in India. Katsunori Ushiku, Managing Director, Mitsubishi Electric India spoke to BW Businessworld’s Roy Varghese recently.
Excerpts:
How did MEI evolve over the years and your plans for capex?
The first business of Mitsubishi Electric in India was supply of equipment for electric locomotives to the Indian Railways in the early 1960’s by Transportation Systems, Mitsubishi Electric Corporation, Japan. From there, we started with a small liaison office in India and grown the company strength by strength. Today, we have a strong network of 3 Manufacturing Facilities, Office and Technical Centres in 23 Locations across the country and one R&D Centre in Pune.
Till some years ago, there were electric and electronic goods companies that had been struggling in the already saturated urban markets. It was during those times that we began to understand that their marketing wisdom often keeps underestimating the importance of affordability in India’s non-metro and tire-2 cities. Inclusion of growth through economic digital India is a multi-pronged effort that would bring the optical fibre network to villages, create new electronics manufacturing facilities and promote e-governance. It has achieved notable results, with over 2 lakh kilometres of fibre optic cables connecting 100,000 panchayats. This can be a big boost to internet access, enabling millions of people in semi-rural and rural India to reach markets and knowledge. These factors of technology development will have a positive impact on the market and will foster growth of consumer awareness, improve the affordability of internet access, increase readiness to accept technology and will lead to increased demand of advanced electric and electronic products and technology.
Thus, this is the growth phase for MEI and we are trying to expand our business horizon as well as consolidate on the capex done in the recent past. We will expand to Tier-2 cities and semi-urban areas and depending on the market demand we will decide the further course of action in this regard. As of now, we are keeping a watchful eye on India and we are doing our constant research on market, opportunities and the paradigm shift in ease of manufacturing after the “Make in India” Programme.
Your marketing strategy for the Indian market?
For the Indian market, Mitsubishi Electric has plans to concentrate and focus on selling more heating, ventilation and air conditioning products; electrical equipment used in train cars; Factory Automation products for Industry, Process Automation and Renewal Energy segment; Semiconductor products for the Indian Railways, Renewal Sector and Medical devices; etc. In fiscal 2014, our generated sales were 9.3 Billion INR and we want to raise this by about 140 per cent to between 22 Billion INR and 23 Billion INR in the year ending in March 2021. The driving sector for growth will be the rail-car electrical equipment and HVAC businesses, each generating about 6.1 Billion INR in sales a year.
On a division wise strategy, Factory Automation is evolving from a product to solutions business where we are looking at Process Automation, Factory Energy Monitoring System, and Complete Plant Visualization also called “e-F@ctory”. The Cumulative Average Growth Rate of factory automation business in India has been 25 per cent.
For Air Conditioners we are looking at geographic expansion. As explained before the engines of growth of Indian economy are not limited to metro cities only. This is the reason we are expanding our Exclusive Showroom “Hiroba” and “Cooling Planets” with a decent pace which stands at 65 today. The Cumulative Average Growth rate of Air Conditioning Business in India has been 44 per cent.
For Semiconductors and Devices we are looking at new avenues of business expansion. As a leading global supplier of semiconductors, it is our duty to propose industries about new technology where our component plays a key role. In this context, we are in discussion with many automobile companies in India for development of electric and semi-hybrid technology. This is an industry trend which will gradually see transition from non-renewable to renewable source of energy.
How important is the Indian market for you and where does it stand vis-à-vis the global market?
India is an important market for us, the opportunities in India is immense and with a GDP around 7-7.5 per cent India is definitely one of the hottest business destinations in the world today. Compared to matured markets like North America, Europe or Japan the potential of India is very huge but it will require time and effort from companies to realise that potential. As of now, India does not contribute a very large amount to the company’s revenues.
However, we have huge expectations from the Indian market and our commitment to Indian market can be seen from the gradual investments and growth in Business Interest we are doing here. We are watching very closely the development and reforms happening in India. We are eager to participate in the infrastructure to basic water treatment plants to HVAC needs of the Indians.
Your R&D initiatives… How much percentage Mitsubishi Electric spends on R&D from its global revenue?
Mitsubishi Electric spent 201.3 billion yen in R&D (consolidated) for last FY ended March 31, 2017. This is 4.7 per cent of the consolidated net sales of that year.
In India, MEI has one R&D centre at Pune which develops factory automation products for India. They have developed graphic operation controllers (GOC) in India. The R&D centre in Pune boasts of a facility which supports information, industry feedback and data to Nagoya Works which is one of the key factories of Mitsubishi Electric producing Factory Automation Equipment for Japan as well as global market.
What is your growth perspective for Indian electrical and electronics manufacturing industry?
India has a huge demand for industrial automation. With its population of than 1.2 billion habitants, India is expected to be the most populous country in the world by 2050 and the third largest GDP after China and USA. The manufacturing sector is growing rapidly and manufacturers are being forced to adopt advanced automation solutions with less human intervention. The size of the Indian economy, the changes in the age structure of the population and the relatively high economic growth make the Indian subcontinent an important market of the future. Today, automation technology in India has a growth potential of more than 10-12 per cent per annum. But there are still some market constraints like poorly developed infrastructure and the lack of quality technicians. For the near future, economists see great growth potential in the consumer electronics, biotech/pharma, water, food and automotive industries -- all of which can benefit from higher automation. Factors like “Make in India”, “Increased FDI”, and increased purchasing power are factory which are further inducing growth in the industry from a macro perspective.
How important is technology innovations for MEI and what are the latest in that front?
From manufacturing of electric fan in 1921 to the launch of communication satellite TURKSAT 4B, Innovation is the core of Mitsubishi Electric Products. Globally we are known to be one of the leaders in the research and innovation in the electric and electronic domain. To name a few: Robots, Semiconductor & Device, High COP Aircon products, energy efficient FA products, Greenhouse gas monitoring satellite-GOSAT, Particle Beam Therapy, High-Definition Astronomical Telescope Technology are some of the recent technologies developed by us which explains how important technology is for Mitsubishi Electric.
The company is in a constant endeavour to innovate and develop new technologies. Just for example we informed our stakeholders about Mitsubishi Electric Cyber-attack Detection Technology for Critical Infrastructure Systems (Commercialisation for electric power infrastructure is planned from around fiscal 2018), when the whole world was worried about cyber-attacks last week. That is the power of our technology. It is robust, tactical and well thought of, made for tomorrow.
MEI’s market share in consumer electronics, air-conditioners, chillers etc.
Frankly in India there is no reliable source of data which could tell us brand wise market share etc. However from our internal survey, we estimate that we have a 5 per cent market share in the overall room air conditioner segment. However it would be unfair to judge us basis market percentage because we operate in the premium segment which itself comprises of a very small segment of the market. In the VRF Category we are very strong and we are a close second in terms of market revenue. However again if you consider this dynamics from a market segment standpoint then we would be the leader in premium segment as well.
I would like to emphasise that by premium player, I mean a player which is using the world’s most advanced technology for manufacturing air-conditioners which are done under stringent quality measures as per “Mitsubishi Electric Quality”. Every component from Compressors to PCBs are made in-house and made of excellent input quality which is the reason why our products are above the market both in price and quality.
Your ‘make in India’ initiatives?
As our contribution to the “Make in India” initiative, Mitsubishi Electric India has set up two new factories in India. In November 2015, we opened a factory for transportation-systems business in Bidadi, near Bengaluru for rolling stock equipment with an investment of approx. Rs 541 million. In May 2016, considering the huge growth potential of Indian machine tool market, a technical centre for CNC Business was set up in Peenya, Bengaluru, this new facility aims to contribute for expansion and support of Indian Machine tool market. We will also support the ‘Make in India’ initiative through our high efficiency products of Factory Automation which aims at empowering industries.
Talking about our Group Companies in India, Mitsubishi Electric Automotive India Pvt. Ltd. which is a Wholly owned subsidiary of Mitsubishi Electric Corporation has been manufacturing automotive equipment in India since late 90’s and Mitsubishi Electric India Pvt. Ltd. has been manufacturing factory automation products in India in the recent past as well.
Other Group Company Mitsubishi Elevator India has also commenced operation from our elevator factory in Vemagal (Distt Kolar), which was inaugurated in February, 2017 near Bengaluru with an investment of Rs 1,833 Million.
