Coimbatore-based Elgi Equipments Ltd, a leading air-compressor manufacturer, is implementing strategic measures to maintain its competitive edge in response to the growing influx of low-cost Chinese products in the Indian market. The company is also working on its product portfolio to address these challenges head-on.

With the Chinese market experiencing slower growth, manufacturers from China are intensifying efforts to fill their factory capacities, leading to increased dumping of products in India.

“We’ve conducted a thorough analysis of their machines and suppliers, and there’s clearly something unusual with their pricing. Our responsibility is to respond effectively. However, this market segment differs from our usual customers. It includes customers who are capital-constrained and highly price-sensitive,” said Jairam Varadaraj, Managing Director of Elgi Equipments Ltd, in an interview with businessline.

The import-related challenges are primarily in the low-kilowatt screw compressor segment. Many customers who have previously used piston compressors find the standard screw compressors offered by Elgi and other multinational companies in India to be too expensive to switch to. But, the transition from piston to screw compressors is happening now, with the Chinese players creating latent demand by aggressive dumping of their low-priced products.

“If pricing were based on fair costs, we wouldn’t have to worry about competing with Chinese products. But, there is a lack of transparency in their pricing,” he said.

Products for the domestic market

Elgi’s primary response involves creating products at lower cost without compromising quality. The company, which recorded a total revenue of ₹3,273 crore in FY24, is working on offering higher quality and localised products to differentiate itself from competitors. The company is betting on its ability to engineer products specifically for the Indian market.

“We’re leveraging technology to reduce costs, and the results are promising. These new products are currently undergoing market validation, and we expect to launch them by the end of the calendar year,” he added.

A significant portion of the market — around 75-80 per cent — values products based on overall value, not just price, considering factors such as energy efficiency, maintenance costs, and reliability. However, about 20-25 per cent of the market is purely price-driven. For them, brand and service aren’t as important, though they often realise their mistake too late. Elgi is keen not to ignore this segment, particularly in a large market like India.

For the value-driven segment, which makes up 75-80 per cent of the market, Elgi has a strong innovation pipeline to differentiate its offerings. For the price-sensitive or budget-conscious segment, the company has developed a targeted response. “We’re now focusing on anticipating challenges rather than merely reacting to them,” Varadaraj said.

Discussing the growth outlook for the company in the current fiscal, he was optimistic about Elgi’s prospects, buoyed by significant investments in revamping its go-to-market strategy. “We’re currently running pilots, and by October or November, we plan to roll out the strategy nationwide. While some impact will be seen this year, the real benefits will become more evident over the next five years in India,” he said.

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