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LG to invest US$ 20 m for refrigerator plant - Views on News from Equitymaster
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  • Nov 8, 1999

    LG to invest US$ 20 m for refrigerator plant

    LG Electronics India Limited plans to set up a refrigerator manufacturing plant in India, with an initial investment to the tune of US$ 20 m.

    The company is a 100% subsidiary of South Korean consumer durables major LG Electronics. It currently markets the refrigerators, which are manufactured at Voltas' Allwyn unit in Hyderabad. This agreement is valid up to December 2002. It also imports refrigerators with capacities over 300 litres from its parent. The company accounts for 6% of the total colour television market in India.

    The proposed plant will come up at the company's existing premises in Noida, Uttar Pradesh, with an installed capacity to manufacture 20,000 units. It will become operational in the first half of 2001.The plant is set to manufacture refrigerators of capacities below 300 litres.

    The move is part of the company's strategy to focus on home appliances. Recently, the Indian arm of Daewoo's home appliances division decided to make a similar move in the refrigeration segment. India's refrigerator segment is currently growing between 10-12% annually and has the potential to expand significantly given the low penetration levels of the product. These companies are also looking at making Indian plants their sourcing base for exports given cheaper manpower cost and India's technological competency.

    The refrigerator segment, which is currently dominated by Godrej, Electrolux (formerly Voltas-Electrolux), BPL and a host of other players, is likely to see increased marketing warfare, with companies vying with each other to woo the consumer. This is likely to lead to competitive pricing and more bonanza offers in the future. The net result will be focus on volumes as margins get squeezed, resulting in market expansion. Till now LG has desisted from low pricing of products. It has instead positioned itself as a premium brand offering value to consumers. The company has focussed on margins rather than volumes. But will it change tack in future remains to be seen.



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