Chinese consumer durable giant Haier has entered into a contract manufacturing agreement with Tata Group owned Voltas Ltd for air-conditioners and refrigerators. This follows the company’s termination of contract manufacturing of refrigerators for LG and Samsung from its Hyderabad unit.
Voltas suffered an initial set back in contract manufacturing activities due to low off-take by its customers like LG and Samsung which have set up their own manufacturing plants. This gap has been partly mitigated by immediate contingency plans in new product development as well as tying up with Haier. The Chinese consumer company has already launched its products in the selected markets in India.
"We are gradually reducing dependence on OEM customers for refrigerators through launching innovative products in the market. While Samsung is still continuing to source products from the company, LG has ceased their offtake of refrigerators from Voltas’ Hyderabad plant. Recently, we have tied up with Haier for supplying refrigerators and air-conditioners," said a Voltas official. However,the size and volume of the agreement could not be ascertained.
The Hyderabad unit is progressing in its strategy of reducing its dependence on OEM customers for refrigerators. In order to proactively respond to the expected drop in demand, the unit has moved aggressively to introduce new business lines consisting of water coolers, Sensicool air conditioners for telecom applications, ductable air conditioners and ‘Coldcel’ branded refrigerators. In freezers and coolers, the company has established itself as a market leader in all segments and has achieved the leadership position with the market share of 30 per cent.
In its pursuit of new lines of business, the company intensified its drive to capture fast-growing niche markets in telecom and banking. The Sensicool range is targeted at these sectors and has registered 28 per cent growth while ductable air-conditioners grew by 650 per cent on a low base during 2003-04. The company offers products from its international manufacturer Uniflair of Italy which specialises in precision air-conditioners and cooling systems offering advanced technological solutions for telecom applications.
Addressing the shareholders at the company’s 50th annual general meeting Voltas Ltd chairman Ishaat Hussain said, "In cooling appliances business continued to sustain the aggressive thrust which had helped maintain the number two position in the window air conditioner market. The contract manufacturing business of refrigerators has not turned up as our expectations. We are trying to see how we can grow in that segment."