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Markets: Koreans focused on strengthening production bases in India

Fiinews by Fiinews
March 31, 2024
in Markets
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LG Electronics – a premium brand in the Indian home appliance market

Amid the escalating US-China rivalry, global supply chains are being reshaped and India, the world’s fifth-largest economy, is getting fresh attention from South Korean tech giants, Korea Herald reported on 27 Mar 2024.

India, the world’s largest democratised consumer market of 1.4 billion people, has enjoyed robust economic growth over the last three decades.

“While China is increasingly turning into a closed economy, Korean companies are flocking to India, a more open and vibrant economy. Especially when the consumers’ purchasing power grows enough, the country will become one of the key growth drivers,” said Kim Dae-jong, a business administration professor at Sejong University.

Samsung Electronics has accelerated its business expansion in India in an apparent move to derisk from China, where South Korea’s biggest conflomerate has struggled to elevate sluggish sales. According to industry sources, the tech giant is not only betting big on the buying power of India’s huge, young population, but also on making the country an integrated hub of manufacturing, sales and R&D.

Vice Chairman and co-CEO Han Jong-hee visited Samsung BKC and underlined the company’s commitment to the Indian market by bringing artificial intelligence and hyper-connectivity to its consumers in India.

Samsung BKC, flagship connected lifestyle experience store located in Mumbai which opened in January, marks Samsung’s first brand store in India following launches in major cities such as New York and London.

Upon his visit to the store, Han highlighted that India is one of the biggest and fastest-growing markets globally and offers a huge opportunity for Samsung https://www.samsung.com/sg/ .

“India is the next big playground for AI and our flagship Samsung BKC store is an embodiment of our ‘AI for All’ vision and will showcase ‘One Samsung.’ … India has a large population of tech-savvy young consumers that inspire us to innovate,” Han said.

He saw thousands of young, enterprising youth work at Samsung R&D centres to bring cutting-edge technologies such as AI to the world. “We are proud of them,” the vice chairman underscored.

The company has been in India for over 28 years, having begun operations there in 1995. On several occasions, the Samsung chief has stressed his will to make Samsung become a “true local company” in India, not just a foreign investor.

Samsung has been operating the world’s largest mobile manufacturing plant in Noida, which is backed by the Indian government’s tax benefits. Its Chennai plant produces Samsung’s home appliances and TVs and Samsung R&D Institute India-Bangalore is the tech giant’s largest R&D center outside of Korea.

Additionally, it recently established a chip research organization for solid-state storage devices for computers.

Samsung is also making efforts to win over Indian consumers by opening a series of premium experience stores in major cities there. As a result, it reclaimed the top spot in smartphone sales in India last year, holding a 19% market share, beating China’s Vivo (18 percent), Xiaomi (17%) and Realme (12%), market research firm Canalys said.

According to the company, the net profit earned by Samsung India Electronics came to 1.15 trillion won (US$858 million) last year, more than doubling from the previous year’s 508.5 billion won.

“Samsung has production corporations, research institutes and design organizations to produce products thoroughly optimized for local demand, and is significantly expanding its workforce there,” said an industry official who wished to be unnamed. “Because India’s young consumers have a keen interest in IT devices, in particular, Samsung is putting a lot of efforts to win their hearts.”

LG Electronics, the world’s largest home appliance maker, has also seen stunning growth in India. Last year, its Indian unit posted 3.3 trillion won in sales, a 33.6% jump from 2.4 trillion won in 2018, according to a recent regulatory filing.

LG Electronics CEO Cho Joo-wan inspected the company’s key production facility for home appliances in June last year.

Like its crosstown rival Samsung, LG has also secured an extensive business network in the country ranging from sales to production to R&D.

More recently, the company has been betting on the soaring premium alliance market there. Last year, it invested about 31 billion won to expand the production of premium double-door refrigerators at its Pune facility while upping investment in the air conditioning segment with an annual growth rate of over 30%.

Another strategic focus is business-to-business beyond its leadership in TVs and home appliances. The firm has launched a series of showrooms across India for corporate clients, called Business Innovation Centres. After centres opened in Noida, Mumbai and Bengaluru, a fourth facility showcasing commercial displays and devices for hospitals, schools and offices recently opened in Chennai.

“LG Electronics https://www.lg.com/ has established itself as a premium brand in the Indian home appliance market. Based on that success, we see great potential in B2B now,” an LG official said.

LG aims to elevate the proportion of B2B sales from the current 10% to 25% of its total Indian sales in the longer term.

India’s home appliance market is expected to more than double from US$10.93 billion in 2018 to US$21.03 billion in 2025, according to the state-run Korea Trade-Investment Promotion Agency.

In the meantime, LG Energy Solution, the nation’s largest battery maker for electric vehicles, has established itself as a leading player in India’s electric two-wheeler market with a more than 50 percent market share, according to the Korea Herald report.

Its key clients include TVS Motor and Ola Electric, the top electric scooter manufacturers in India.

“We saw the opportunity in India’s light EV market early on and set up a local sales team. This helped us meet customer needs fast and win their trust quickly within just a year,” an official from LG Energy Solution said.

Hyundai Motor Group, the world’s No. 3 carmaker, is already a major player in India, consistently holding the second-largest market share at about 15 percent. Kia, with its popular sport utility vehicle range, captured a 7 percent share of the Indian passenger car market in 2022. India accounts for 14 percent and 9 percent of Hyundai and Kia’s worldwide sales, respectively, significantly outpacing other international competitors.

Hyundai Motor Group Chairman Chung Euisun (centre) talks with Indian employees during his visit to Hyundai Motor India Research and Development Center in August last year. (Hyundai Motor Group)

In January, Hyundai announced a substantial increase in its investment in India, with an additional 1 trillion won invested in Talegaon. Together with its initial investment in Tamil Nadu, the total investment adds up to 4 trillion won.

The new investment aims to transform the GM auto plant that Hyundai acquired into a manufacturing hub. The Talegaon plant has an annual production capacity of about 130,000 vehicles. Hyundai will bolster and upgrade its production facilities and begin full-scale operations next year.

The previous investment in Tamil Nadu announced last May includes establishing EV production facilities and charging infrastructure, and the creation the Hydrogen Valley Innovation Hub in partnership with the Indian Institute of Technology Madras, Hyundai’s second hydrogen project after Guangzhou, China.

Hyundai-Kia already has a significant manufacturing presence in India, with Hyundai operating two complete car plants and Kia boasting the country’s most high-tech automotive factory https://www.makeinindia.com/ .

“In our global strategy, India’s role is paramount, with our production capacity here set to double that of the US, which is currently at 700,000 units. Given the reduced operational capacity in China, below half of our (maximum thereof) 1.5 million units, this emphasis on India becomes even more critical. With our future investments, we’re aiming to transform India into our largest overseas production hub outside of South Korea,” a Hyundai Motor Group official told The Korea Herald.

Local production is crucial for market entry in India, as imported vehicles face tariffs of 70% to 125%, set by the Modi government to boost domestic production.

“While Hyundai-Kia https://www.hyundai.com/worldwide/en has successfully secured its position as the third-largest global automaker in recent years, surpassing its highest market share of 8.9% in 2014 remains elusive. A significant factor in this is the reduction of their market share in China from over 9 percent to less than 2%,” said Moon Yong-kwan, an automotive analyst at Shin Young Securities.

“Despite the importance of established markets like the US and Europe, their relatively stable demand contrasts with the dynamic growth potential of emerging markets. Given the intensifying competition in China, Hyundai and Kia’s strong performance in the Indian market could well compensate for their setbacks in China,” the Korean daily had Moon as saying. Fiinews.com

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Fiinews.com features through news articles on business opportunities in the Indian market for the benefits of foreigners. It is also a platform for international businesses to showcase through elaborate articles on their products & services to the Indian consumers and corporations exploiting industrialisation of the country.

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