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Daikin Air Conditioners: A $20 Billion Dream in China, Why is it Struggling Against the Rise of Domestic Brands?

Tech 2024-08-02 11:39:38 Source: Network
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Daikin Air Conditioners: A $20 Billion Dream in China, Why is it Struggling Against the Rise of Domestic Brands?In today's China, where domestic air conditioner brands are mushrooming, Gree, Midea, and Haier are firmly holding onto the market share, meeting the Chinese people's demand for high-quality home appliances with their cost-effective products. However, Daikin, a legendary Japanese air conditioner brand, has carved its own niche in the Chinese market with its high prices and low-key presence, becoming a "hidden champion" in the past 29 years

Daikin Air Conditioners: A $20 Billion Dream in China, Why is it Struggling Against the Rise of Domestic Brands?

In today's China, where domestic air conditioner brands are mushrooming, Gree, Midea, and Haier are firmly holding onto the market share, meeting the Chinese people's demand for high-quality home appliances with their cost-effective products. However, Daikin, a legendary Japanese air conditioner brand, has carved its own niche in the Chinese market with its high prices and low-key presence, becoming a "hidden champion" in the past 29 years. Few people know that this "old brand," which many mistakenly believe to be a domestic brand, has already raked in over 140 billion yuan (approximately $20 billion) in the Chinese market.

Daikin Air Conditioners: A $20 Billion Dream in China, Why is it Struggling Against the Rise of Domestic Brands?

So, how did Daikin take root in the Chinese market and achieve such success? Why is its path to success facing challenges in recent years, even facing the risk of being overtaken by local brands? This article will delve into the rise and fall of Daikin in China, revealing the business logic and market strategy behind it.

Daikin Air Conditioners: A $20 Billion Dream in China, Why is it Struggling Against the Rise of Domestic Brands?

Daikin's Development History: From Chemical Giant to Air Conditioning Colossus

Daikin Air Conditioners: A $20 Billion Dream in China, Why is it Struggling Against the Rise of Domestic Brands?

Daikin Air Conditioning's predecessor was "Osaka Metal Industries," founded in 1924, initially focusing on chemical businesses. After nearly a century of development, Osaka Metal Industries gradually transformed, shifting its focus to the air conditioning manufacturing sector. In 1954, Daikin produced its first commercial air conditioner, officially entering the air conditioning market.

Daikin Air Conditioners: A $20 Billion Dream in China, Why is it Struggling Against the Rise of Domestic Brands?

As a latecomer, Daikin demonstrated strong competitiveness in the commercial air conditioning field. Through continuous independent research and development and technological innovation, Daikin quickly gained recognition in the commercial market for its exceptional product quality and precise temperature control system.

Daikin Air Conditioners: A $20 Billion Dream in China, Why is it Struggling Against the Rise of Domestic Brands?

Fifteen years later, Daikin set its sights on the broader residential central air conditioning market, embarking on the development of residential air conditioners. Leveraging its accumulated years of experience in commercial air conditioning technology, combined with its focus on improving energy efficiency and reducing noise levels, Daikin quickly established a foothold in the residential central air conditioning market and continued to expand its market share.

Daikin Air Conditioners: A $20 Billion Dream in China, Why is it Struggling Against the Rise of Domestic Brands?

With the rise of intelligent technology, Daikin further developed intelligent central air conditioners, excelling in energy efficiency, environmental friendliness, and precise temperature control, winning over more users. Daikin subsequently expanded its global market, with sales rising year after year, even reaching the status of an "air conditioning legion," achieving annual sales exceeding 800,000 units.

Daikin Air Conditioners: A $20 Billion Dream in China, Why is it Struggling Against the Rise of Domestic Brands?

Daikin in China: The Success and Challenges of Localization Strategy

Daikin Air Conditioners: A $20 Billion Dream in China, Why is it Struggling Against the Rise of Domestic Brands?

Entering the 1990s, with China's rapid economic development and urbanisation, Daikin Air Conditioning set its sights on the Chinese market with its immense potential. As a latecomer, Daikin maintained its brand's traditional industrial manufacturing advantages while making timely adjustments to localize its strategy, focusing on the domestic office and home renovation market.

Daikin Air Conditioners: A $20 Billion Dream in China, Why is it Struggling Against the Rise of Domestic Brands?

Daikin Air Conditioning's operations in the Chinese market primarily employed two strategies:

Daikin Air Conditioners: A $20 Billion Dream in China, Why is it Struggling Against the Rise of Domestic Brands?

  • High-End Product Strategy: Winning over corporate clients with its high-quality, top-tier products. Daikin has established a high-end brand image in the commercial air conditioning field with its exquisite craftsmanship, advanced technology, and stable performance.

Daikin Air Conditioners: A $20 Billion Dream in China, Why is it Struggling Against the Rise of Domestic Brands?

  • Localization Product Strategy: Launching products tailored to the needs of the domestic market. Addressing the limited space constraints in many units and homes in China, Daikin actively promoted embedded ceiling air conditioners. The built-in design saves space while maintaining comfort. In response to the increasing user demand for temperature control precision, Daikin invested heavily in variable frequency adjustment technology, introducing a series of powerful and high-performing variable frequency air conditioning products.

Daikin Air Conditioners: A $20 Billion Dream in China, Why is it Struggling Against the Rise of Domestic Brands?

These "practical" measures, tailored to the needs of domestic consumers, quickly earned Daikin a good reputation in China. In particular, its intelligent central air conditioning products have become "standard" in business offices and home renovations. Statistics show that Daikin's sales in China reached 140 billion yuan (approximately $20 billion) in just one year, demonstrating its strong position in the Chinese market.

Daikin Air Conditioners: A $20 Billion Dream in China, Why is it Struggling Against the Rise of Domestic Brands?

Daikin's Dilemma: The High-End Dream Being Squeezed by "Domestic Brands"

However, in recent years, with the rise of domestic air conditioner brands and the increasingly fierce competition in the low-to-mid-end market, Daikin Air Conditioning has faced unprecedented pressure in the Chinese market, with its market share and sales declining.

Daikin faces three key challenges in the Chinese market:

  • Unregulated Dealer Behavior: Some franchise dealers, obsessed with maximizing profits, tend to exaggerate product benefits and mislead users, directly conflicting with Daikin's "refined" brand positioning. Additionally, some dealers, seeking higher commissions, engage in misleading sales tactics, resulting in user experiences falling short of expectations, generating negative impressions of the Daikin brand. Some dealers even resort to unethical competitive practices in vying for developer projects by inflating prices and engaging in bundled sales. These unregulated behaviors have cast a shadow over the high-end image of the Daikin brand in the minds of consumers.
  • Price-Performance Disadvantage: Especially in the ordinary model market for residential air conditioners, Daikin struggles to compete with domestic brands. With its relatively high product pricing and limited functionality, it fails to gain a foothold in this highly competitive market. Even in Daikin's traditionally strong central air conditioning sector, its high-end products face a stumbling block due to their high prices and narrow selection, making them prohibitive for many home renovation users and developers. After careful consideration, many choose to be drawn to other brands with more model options and more affordable prices.
  • Neglect in Brand Image Building: Compared to its performance in developed countries like Japan, Daikin Air Conditioning's brand awareness and reputation in the Chinese domestic market are not as prominent. In fact, compared to other Japanese home appliance brands like Sony and Panasonic, Daikin has maintained a low-key approach in marketing and product promotion, rarely consciously building a "luxurious high-end" brand image. Over time, Daikin's market share has been gradually eroded by emerging players.

Daikin's Future: Innovation is the Key to Breaking Through

Overall, Daikin Air Conditioning's performance in the Chinese market has been less than ideal in recent times, with sales and market share continuing to decline. Relying solely on technological advantages and high-end products is insufficient for Daikin to win the day. Daikin must deeply reflect on its current challenges and make changes and innovations.

Daikin needs to take the following measures to break through the competition:

  • Strengthen Dealer Management and Training: Eliminate unregulated marketing practices at the root, establish a sound dealer management system, enhance dealer training and assessment, ensure sales process standardization and transparency, and safeguard the Daikin brand image.
  • Adjust Product Line Pricing Strategy: Minimize the high-end positioning trap, introduce more price-friendly and practical products based on market demand to meet the needs of diverse consumers and enhance market competitiveness.
  • Increase Marketing Investment and Enhance Image Building: Rebuild a high-end brand impression in the minds of domestic consumers, leverage effective marketing strategies to improve brand awareness and reputation, and attract more consumer attention.

In summary, to maintain its leading position in China and move towards higher levels of development, Daikin must address its problems directly and get to the root of the issue. Otherwise, being completely overtaken by competitors and up-and-coming brands is only a matter of time. For Daikin, making appropriate adjustments and maintaining innovative vitality is the key to breaking through.

Reference:

  • Air Conditioner Sales Once Ranked First in the World, Revenue Exceeded Gree and Midea by 140 Billion Yuan, But No One in China Knows? [https://www.toutiao.com/article/6691495287178920451/?channel=&source=search_tab](https://www.toutiao.com/article/6691495287178920451/?channel=&source=search_tab)

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