Coimbatore-based Elgi Equipments Ltd, a prominent manufacturer of air compressors, is adopting new strategic measures to maintain its market position amid the increasing influx of low-cost Chinese products. The company is revamping its product lineup to tackle these competitive pressures effectively. As growth slows in the Chinese market, Chinese manufacturers are intensifying efforts to export surplus products to India, leading to a rise in market competition.
Jairam Varadaraj, Managing Director of Elgi Equipments Ltd, noted in a recent interview with The Hindu Business Line, “We’ve thoroughly analyzed the pricing and suppliers of Chinese machines. It’s clear there are irregularities in their pricing structures. We need to respond effectively, especially since our typical customers differ from those now targeted by these low-cost products, who are often constrained by tight budgets and highly sensitive to pricing.”
The primary challenge from imports is in the low-kilowatt screw compressor segment. Many customers transitioning from piston compressors find standard screw compressors from Elgi and other multinational firms prohibitively expensive. However, aggressive pricing from Chinese competitors is generating latent demand in this sector.
Varadaraj pointed out, “If pricing were based on fair costs, competing with Chinese products would not be as challenging. The lack of transparency in their pricing practices is a significant concern.” In response, Elgi Equipments is focusing on developing cost-effective products without sacrificing quality.
With a total revenue of ₹3,273 crore in FY24, the company is working on localizing its product offerings to better cater to the Indian market. “We are utilizing technology to drive down costs, and early results are encouraging. We expect these new products to be market-ready by the end of this year,” Varadaraj added.
Elgi’s strategy includes catering to the market segments differently. Around 75-80 percent of the market prioritizes overall value, including energy efficiency, maintenance costs, and reliability. For this segment, Elgi is investing in innovation to stand out.
The remaining 20-25 percent are price-driven, and while they may overlook brand and service initially, they often recognize their oversight later. Elgi aims to address this segment as well, given the large market size in India.
For the value-focused segment, Elgi has a robust innovation pipeline to set its products apart. For the price-sensitive segment, the company has devised a targeted approach to preemptively address market challenges. “We are now focusing on proactive strategies rather than just reacting,” Varadaraj stated.
Looking ahead, Varadaraj expressed optimism about Elgi’s growth prospects, bolstered by recent investments in its market strategy. “We are piloting new approaches and plan to implement them nationwide by October or November. While we anticipate some impact this year, the full benefits will become evident over the next five years,” he concluded.
