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China's Konka sews up grand plans for India's white goods market

Vineeta Mishra in New Delhi

India's white goods market continues to pulsate in the wake of liberalisation of economy. The latest entrant is the $ 2 billion Chinese consumer durables major, Konka Electronics. In August, the company - Konka Electronics India Limited or KIEL -- simultaneously launched 28 colour television models in nine sizes, beginning from the basic 14-inch at Rs 6,990 to the 42-inch one at Rs 800,000. The launch was marked by a media blitz advertising its strikingly economical price-lines.

Unlike most global players who debut with just a few models, Konka has offered products across-the-board at launch-time. In China, Konka has a majority 24 per cent of the marketshare. Japan's Sony has 3.70 per cent and Panasonic 2.10 per cent.

Konka aspires to do an encore in India. "The experience of Konka in China is what encouraged the company to come to India. The expectation of the Chinese parent company is that the Indian market will also grow or experience a growth similar to China's in the coming few years. The parent company's feeling is that the Chinese market experience will be witnessed in India also," says Rajeev Puri, CEO, KEIL.

KEIL started with a triple partnership in which it held a 51 per cent equity stake, with 25 per cent and 24 per cent held by India's Hotline Group and the Hong Kong-based tuner-manufacturer, Wittis, respectively. The company entered with an initial capital investment of Rs 500 million.

Konka has chalked out several strategies to realise its vision for the Indian market. "You see, in the Indian market, most of the players have not upgraded their models since inception. Now if you see Konka in China, last year the average rate of introduction of a new model was three days. Yes we are going to make this technology in India made available at an affordable price. We are going to give value-added products to our customers. Konka's products will be offered at prices which are within their reach. We are going to spend a lot of money on promoting Konka, the brand name. But it will be again better technology at affordable prices," adds Puri.

But would this lead to a price war in the Indian CTV market? V N Masaldon, managing director, Hotline group, says, "Who started the CTV price war? Akai did. But thanks to them, the CTV market has expanded. Earlier, the CTV market was stagnating at two to two and a half million. But it is due to the innovative marketing skills of Videocon and Akai, the market has started expanding. And now, it is likely to touch 5 million. In May alone, when the World Cup was on, LG sold 600, 000 TV sets. Television sets were not available at that time."

KEIL's Puri, however, is not in the mood to kick off a price war. "But if it is inflicted on us, then we'll deal with it."

But with over a dozen players already on Indian turf, is there enough room for new entrants? Hotline's Masaldon says, "The total value of the Indian white goods market is Rs 60 billion approximately, and this is expected to grow at 15 to 20 per cent per annum. In India, the penetration level is very low. Now every five years, the Indian white goods market is expected to double. This throws up immense opportunities not just for new entrants but for existing manufacturers too."

For KEIL, there are several reasons which make it optimistic about the Indian market. "First is the size of the population; second, a lot of upgradation in technology is taking place; and third, the advent of satellite television channels is making people buy either more CTVs or a first one at least. Also, in India, the economic upgradation that is taking place, people are moving from black and white to colour televisions, so all along there will be growth in the colour TV segment," reasons Puri.

Seeing the growth potential in the Indian white goods market, the Chinese parent company has earmarked another Rs 5 billion for its Indian operation. And the focus of the company's operations in India would be on research and development. Last year, the Indian white goods market was estimated at 3.5 billion CTVs but this year the expected growth rate is an optimistic 15-20 per cent. "In our first year of operation, we want to clock a turnover of Rs 2.5 billion."

However, with Hotline having backed out of the venture, KEIL's operations could be hampered as Konka has not as yet set up its own manufacturing facility. It uses Hotline and Wittis's CTV assembling facility at NOIDA near Delhi.

Although Puri denies Hotline's withdrawal, Masaldon says, "As far as we are concerned, we have had some differences on management issues. So we have withdrawn our equity. But I don't see this to impact Konka's operations as there are hundreds of other manufacturing facilities which it can choose from. However, if the company finds our rates suitable to them compared to other manufacturers, we are ready to continue manufacturing for them."

Hotline's plant in NOIDA has a capacity of 50,000 sets per shift per month and makes CTVs for BPL and Videocon.

Masaldan says Hotline wanted to play an active part in KEIL's management affairs but was not allowed to do so. ''We helped them in initial stages for importing CTVs in the form of completely known down sets, semi knocked down sets and completely built units. But there was no reciprocity from Konka's side.''

KEIL's own manufacturing facility is likely to come up in the next 12 months. After giving several proposals to various state governments for setting up a manufacturing facility, the company has chosen NOIDA.

However, the company is not going to just stick to CTVs. On the agenda are the launch of a range of other white goods in the country. KEIL is speeding up the process of setting up a Konka Electronic City at NOIDA in Uttar Pradesh. The planned electronics city will have integrated production facilities for CTVs, digital video disk players, video compact disk players, washing machines, refrigerators, air-conditioners, microwave ovens corded and cordless telephone instruments, mobile phones, fax machines and colour computer monitors. The city is expected to come up within the next six months. And all these would be technologically the best at prices within the reach of the consumer, says Puri.

KEIL is negotiating production plans with at least three original equipment manufacturers or OEMs, following a bitter corporate battle with one of its joint venture partners, the Hotline group.

KEIL is now exploring the production possibilities with other OEMs like Dixon, Dinax and Calcom.

The Konka group is one of the 500 biggest industrial enterprises in China and has acquired international quality management system certificates of ISO 9000 and ISO 14000 standards. It employs over 9,000 people and markets its products in 60 countries.

In China, Konka sells 7 million CTVs annually and leads the market with 24 per cent share. The company's automated plants can assemble a CTV set in 13 seconds. Konka claims to be a market leader in Australia, New Zealand and Indonesia as well. It brings out a new model of CTV every third day. It has manufacturing facilities in Australia, Indonesia, Mexico and the United States.

When China started economic reforms in 1979, the state-controlled Konka Group was formed as the country's first joint venture. The tie-up was with the Hong Kong-based Kongwa. But in 1991, when the company went in for a major financial restructuring, the joint venture came to an end. With Konka's CTV-making capacity having soared to 32 million units a year in China, and domestic demand only 25 million units, the company was forced to look at the overseas market.

Konka's globalisation moves began three years ago, and have expanded rapidly. The company already has a presence in 60 countries which include Indonesia, Malaysia, Singapore, Hong Kong, Thailand, Vietnam, Cambodia, the Middle-East, Turkey, Japan, Europe, Russia, and a production facility in Mexico which feeds the US market. The company hit the Australian shores four years ago where within two years of operation, it captured 11 per cent of the marketshare.

Additional inputs: Sudipt Arora/UNI

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