- LG Electronics India is building a third factory in Sri City, Andhra Pradesh, investing about US$600 million with production targeted by end-2026 and expansion through 2029.
- The site will ramp from air conditioners to washing machines, refrigerators and compressors, reaching annual capacity of ~1.5m ACs, 850k washers, 800k fridges and 2m compressors.
- The project strengthens LG’s India localization and export-hub strategy, though tight timelines and incentive, component and supply-chain dependencies add execution risk.
- Sri City is emerging as India’s AC cluster, with LG’s addition projected to lift it to ~60% of domestic output and ~80% of AC exports by 2027.
Read More
LG’s latest moves in India—capacitous investment, phased manufacturing expansion, and successful IPO of its Indian subsidiary—underscore a multi-pronged strategy: hardening supply chains, localizing value creation, and benefiting from India’s under-penetrated home appliance market. Structurally, the Sri City facility represents not just an incremental factory, but a regional export hub, especially for the Global South markets.
From an operational risk perspective: tight timelines (land handover in May 2025; production start by end-2026) raise execution risk. Scaling into high-precision components manufacturing (e.g., compressors) adds technological and supply chain complexities. Regulatory and incentive dependencies (e.g., state government assistance on electricity, duty exemptions) must be maintained over the plant’s life.
Financially, the IPO yields parent LG Electronics substantial monetization (US$1.3 billion via 15% OFS), though the company doesn’t get fresh capital from the listing. This underscores reliance on internally generated cash or other sources to fund the Sri City build-out.
From a market demand angle: India’s home appliance penetration remains low (~30% for washing machines; ~10% for air conditioners), suggesting high ceiling for growth. Rising middle-income households, policy shifts (PLI, state electronics manufacturing policies), and geo-political supply-chain rebalancing away from China amplify the opportunity. Sri City already hosts multiple AC and component players, accelerating ecosystem effects.
Open questions include: how LG will manage component localization versus import; whether exports will materialize at scale; margins when scaled; currency, trade policy, and global logistics risks; and how competing global brands will respond. How sustainable are government incentives and what reversion risks exist?
Supporting Notes
- LG Electronics India plans to invest ~US$600 million (≈ ₹5,001 crore) to build the Sri City facility over four years.
- The new plant is to be spread over 1 million square metres, with floor space ~220,000 square metres.
- Annual capacities: 800,000 refrigerators; 850,000 washing machines; 1.5 million air conditioners; 2 million AC compressors.
- India’s current appliance penetration: ~30% for washing machines, ~10% for air conditioners.
- Land allocation: 247 acres in Sri City for LG Electronics’ third plant.
- Jobs: ~1,500 direct; ~10,000 indirect or ancillary jobs, with four vendor partners investing ~₹839 crore in supply ecosystem.
- IPO: LGEIL listed on NSE on October 14, 2025; 15% stake sold by parent; IPO raised ~US$1.31 billion (₹116.05 billion).
- Total annual capacity in India post-Sri City: ~3.6 million refrigerators, 3.75 million washing machines, ~4.7 million air conditioners plus ~2 million TVs.
- Sri City’s ecosystem: hosts 7 AC manufacturers, ~17 suppliers; its current AC output ~50% of national production, expected to rise to ~60% (domestic) and ~80% (exports) by 2027.
- Key incentives: full exemption from electricity duty, SGST refunds, subsidies, etc. under Andhra Pradesh manufacturing policy; government approvals expedited.