Daikin’s factory in suburban Houston. The U.S. is expected to phase in tougher energy efficiency regulations for air conditioners under President Joe Biden.
The facility will go into operation in 2024, employing 2,000 workers. Daikin is close to finalising the location, likely in industrial belts in northern or central Mexico.
Annual capacity will total about 1.5 million units. Combined with a Houston-area production hub, Daikin will raise its capacity to supply air-conditioners to North America by nearly 30%.
Daikin is expanding capacity to meet the anticipated rise in demand for energy-efficient units in the US President Joe Biden has returned the US to the Paris climate agreement, and the country is expected to phase in tougher energy regulations for air-conditioners, an area where the US has been behind other nations.
Central air conditioning systems are currently the mainstream choice for buildings in the U.S. But such systems circulate cool air even when no one is in the buildings, resulting in poor energy efficiency. They might not be in compliance with future environmental regulations.
Daikin’s roughly 70,000-sq.-meter plant in Mexico to will produce mainly two types of products for the U.S. market.
One type will be central air-conditioning systems that use inverters for fine control of motor rotation speeds. These can reduce carbon dioxide emissions by 20% to 30% compared with models without such inverters.
US market penetration is only in the 10% range for inverter-type air-conditioners for residential use. With the help of the new Mexican plant, and the production centre in suburban Houston, Daikin plans to sell half a million units in the fiscal year ending March 2026 – more than six times the sales volume forecasted for this fiscal year.
Daikin will also sell indoor air-conditioners popular in Japan. Demand for this type of unit is starting to pick up in the US as people add home-offices to their houses to adapt to pandemic-era work arrangements.
The US market for Japanese-type air conditioners tops 1.5 million units per year and is expected to grow 20% annually going forward, according to Daikin.
The units to be produced in Mexico are currently shipped to the US from factories in Thailand and elsewhere in Asia. But shipping has come to account for more than 20% of the entire cost, depending on the model.
In some instances, Daikin has shipped units by air at a higher cost in response to the congestion of container ships at ports.
With the Mexican plant, Daikin can achieve stable supplies at a lower price. Delivery time can be cut by around five-sixths.
Mexico is home to a vast number of air-conditioning component suppliers, as well as automotive suppliers that make plastics that can be used for air-conditioners. Daikin will build a local supply chain that is less exposed to global disruptions.
Since purchasing US air-conditioning supplier Goodman Global for US$3.7 billion in 2012, Daikin now projects that the Americas will generate more than ¥1 trillion in revenue for the first time this fiscal year. The group has also purchased distributors in a bid to expand sales channels and to control the top market share in the US.
Electricity consumed by air-conditioners globally will triple in 2050 compared with 2016, according to the International Energy Agency. In Japan, air-conditioning eats up nearly 40% of the electricity during a summer night, government data shows. With the world scrambling to reduce carbon emissions, air-conditioners will be expected to offer better energy efficiency.
Daikin announced earlier this month plans to construct a ¥40 billion (US$290 million) plant in Poland to make energy-saving heating systems.