Japan’s AC giant innovates to prepare for Elon Musk’s HVAC project

There’s something remarkable about the “Tesla Effect” in the way it promotes innovation, not only in segments where the company already competes, but also in markets the electric car and energy company has yet to enter. This appears to be the case in the home HVAC segment, with a recent report from Japan stating that air conditioner maker Daikin is now innovating its business model to prepare for Tesla’s likely entry into the home HVAC space.

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

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

The unique subscription model came about as a result of a conversation between Daikin chairman Noriyuki Inoue and Satoshi Akita, the CEO of Wassha, a startup the air conditioner maker has partnered with for collecting fees. Listening to Akita’s experiences in Africa, Daikin’s chairman decided to break away from the company’s traditional business model that focused solely on production and sales.

There was reportedly a sense of urgency in Inoue’s decision, and part of this is Elon Musk’s comments about Tesla potentially entering the home’s HVAC area. In September, Musk told investors that a highly efficient smart home HVAC system is a “pet project” he’d like to explore. “You could really make a much better home HVAC [heating, ventilation and air conditioning] system that’s really quiet and super efficient,” Musk said.

But it’s not just the presence of the Tesla brand that existing players like Daikin will face as the EV maker enters the home appliance segment. After all, Tesla is expected to explore synergies between its many companies, allowing the company to combine products such as Elon Musk’s planned home HVAC system with the company’s existing electric vehicles and energy storage products. This bundle of services, which could create a kind of “ecosystem”, is something that Daikin does not have. And if Apple’s success is any indication, an ecosystem of products could certainly disrupt an established market.

Daikin President Masanori Togawa emphasized the importance of the company’s digital transformation in light of potential disruptors such as Tesla. “The main difference between winners and losers is about who can transform their business with digital technology,” Togawa said. And when you consider how products like the Tesla Model 3 have practically knocked down several veteran 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 innovates to prepare for Elon Musk’s HVAC project

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