Japan’s AC large innovates to arrange for Elon Musk’s HVAC mission

November 23, 2021   |   by Noah Franklin

What is remarkable about the “Tesla Effect” is that it promotes innovation not only in segments in which the company is already competitive, but also in markets in which the electric car and energy company is still penetrating. This appears to be the case in the residential HVAC segment. A recent report from Japan said air conditioning maker Daikin is now renewing its business model in preparation for Tesla’s likely entry into the residential HVAC space.

According to a report from Nikkei Asia, Daikin has launched a smartphone-based air conditioning service in Tanzania, Africa that allows users to turn their air conditioners on only on days when they need them. With this business model, customers would no longer have to buy their actual air conditioning systems. Instead, they would only have to pay an initial installation fee of $ 77 and about $ 1.40 per day to use the machines.

2 / Daikin’s Africa project is a foray into digital services. One reason for the urgency is the possible entry of Tesla. Elon Musk has shown interest in quiet and efficient building services (heating, ventilation and air conditioning). pic.twitter.com/8uMaWikskh

– Nikkei Asia (@NikkeiAsia) August 28, 2021

Taro Mitani, director of collaboration with startups at Daikin, noted that the new business strategy is part of the company’s attempt to try new things and adopt more digital solutions. “We wanted to try a new operating model,” he said, noting that the plan is to launch 50,000 subscriptions, possibly for businesses like beauty salons and restaurants.

The unique subscription model came about as a result of a conversation between the chairman of Daikin Noriyuki Inoue and Satoshi Akita, the CEO of Wassha, a startup the air conditioning manufacturer has teamed up with for its fee collection. While listening to Akita’s experience in Africa, the Daikin chairman decided to move away from the company’s traditional business model of only manufacturing and distribution.

There was reportedly a sense of urgency in Inoue’s decision, and part of it is Elon Musk’s comments that Tesla may be breaking into the home HVAC space. Back in September, Musk told investors that an extremely efficient smart home HVAC system was a “pet project” that he would like to explore. “You could really do a much better home HVAC [heating, ventilation and air conditioning] System that is really quiet and super efficient, ”said Musk.

But it’s not just the presence of the Tesla brand that existing players like Daikin will have to grapple with when the electric vehicle maker enters the home appliance segment. Eventually, Tesla is expected to explore synergies between its many businesses that would allow the company to combine products such as Elon Musk’s proposed HVAC system with the company’s existing electric vehicles and energy storage products. This set of services that could create some sort of “ecosystem” is something Daikin doesn’t have. And if Apple’s success is any indication, an ecosystem of products could definitely disrupt an established market.

Daikin President Masanori Togawa highlighted the importance of the company’s digital transformation in the face of potential disruptors like Tesla. “The main difference between winners and losers will be who can transform their digital technology business,” said Togawa. And when you consider how products like the Tesla Model 3 have practically knocked down several long-established automakers from the US and Europe, the Daikin president’s comments definitely hit the mark.

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Tesla Effect: Japan’s AC giant prepares for Elon Musk’s HVAC project

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