LG Electronics challenges to become India's 'national appliance brand', targeting growing middle class

[Korea Financial Times, Gwak Horyung] LG Electronics has turned its attention to the mass-market segment to break through growth limitations at its Indian subsidiary, which has been delivering the most impressive performance.

According to LG Electronics' semi-annual report on the 21st, the Indian subsidiary (LGEIL) recorded sales of KRW 2.2729 trillion and net profit of KRW 209.7 billion in the first half of this year. Sales volume ranks third among overseas electronics subsidiaries after the US (KRW 6.84 trillion) and Vietnam (KRW 3.1428 trillion).

The Indian subsidiary's net profit margin of 9.2 percent is two to three times higher compared to other overseas subsidiaries. Particularly, as the largest market, the US, turned to deficit this year due to tariff impacts, India's importance has become increasingly prominent.
Main products in India include refrigerators, washing machines, inverter air conditioners, and TVs. Including microwaves, the company is known to hold first place in local market share across five product categories. Focus on premium products targeting high-income groups has led to high profitability.

However, LG Electronics CEO Cho Joo-wan announced a new vision as 'India's best national company' alongside the Indian subsidiary's listing. This signifies expanding business beyond existing premium to mass-market products. The aim is to actively target Indian middle-class households, whose proportion is projected to increase from 29 percent in 2020 to 46 percent by 2030.

To this end, the company plans to launch a specialised lineup 'Essential Series' in India. This marks the first time the company has introduced an appliance series targeting a specific region. Beyond colourful floral designs preferred by Indian consumers, the lineup features mass-market products with affordable price points. An LG Electronics official stated: "We judged there exists an appropriate price range with high preference proportional to local purchasing power."

For example, existing bestseller refrigerators on LG Electronics India's homepage are 322L double-door and 655L 4-door models. Local launch prices are 37,990 rupees (approximately KRW 620,000) and 79,990 rupees (KRW 1.3 million) respectively.

In contrast, products registered in the new Essential Series feature 200L-class double-door models. Notably, considering unstable local power supply conditions, an 'Auto Smart Connector' function automatically connects to household inverters during emergencies. While pricing has not yet been disclosed, prices are expected to be set at 60 percent of comparable 300L-class domestic products.

Market reaction to this strategy is positive. The Indian subsidiary's listing on the 14th succeeded with the largest capital influx locally since 2008. Public offering competition reached 54-to-1.

Following the Indian subsidiary's listing, domestic share prices also show an upward trend, rising approximately 10 percent from KRW 81,000 on the 13th to KRW 88,000 on the 21st.

Meanwhile, LG Electronics anticipates improved financial structure through KRW 1.8 trillion raised from the Indian subsidiary's listing. The funds are also expected to be utilised for investments in new businesses such as vehicle components and heating, ventilation and air conditioning.

Gwak Horyung (horr@fntimes.com)