MHI Establishes Subsidiary to Oversee Air-conditioning Business in China

China is one of the most important markets for MHI's global AC&R business. For this reason, the company has adopted a strategy to unify its AC&R brand into one; at the same time, it has begun a review of related business with a view to the future, including reorganization of sales and service structures. Last year the company launched a new "K"* brand for its air-conditioning products in China. Meanwhile, leveraging its existing import agents and regional general agents - who deal with large contracts, primarily medium- and large-scale commercial-use multi-type air-conditioners - MHI intends to establish its own new sales network of stores ("K Points") dedicated to company products, more than 50 of which have already begun operation. Through this initiative, MHI aims to capture demand for small-scale multi-type air-conditioning units from wealthy and middle-class consumers, segments that are growing rapidly in China. MHI targets 100 stores in the first business year and over 200 within the first two years.

MHI made its full-scale entry into China's AC&R market in 1993 with the establishment of Mitsubishi Heavy Industries-Haier (Qingdao) Air-Conditioners Co., Ltd. (MHAQ), a commercial-use air-conditioner production joint venture with Haier Co., Ltd., China's largest appliance manufacturer. In 1994 the company established Mitsubishi Heavy Industries-Jinling Air-Conditioners Company, Ltd. (MJA), a joint venture for residential-use air-conditioner production with the Jiangmen Jinling Group of Guangdong. Since 2002 MHISH has also begun development of a Chinese market for imported products, mainly large-scale air-conditioning equipment and refrigeration systems, including refrigeration units for tracks and trailers and centrifugal chillers produced at MHI's plants in Japan.

Subsequently, however, efficient business developments in China were impeded by restraint in investing into that market and difficulty to establish a strong brand strategy due to the diversity of its product brands. To resolve these issues, unification of its air-conditioning businesses in China - which until now have been conducted separately by MHAQ, MJA and MHISH - and implementation of a new brand strategy have been matters of urgency, along with establishment of a company dedicated to AC&R business that can comprehensively handle all aspects of the air-conditioning business in China, including refrigeration units for tracks and trailers and centrifugal chillers.

MHI considers AC&R as one of its business areas well positioned to address environmental issues. The company thus intends to further intensify its aggressive market exploration activities in this area, leveraging its unique strength as a comprehensive AC&R solutions provider.

Note: The "K" in "K Brand" is taken from two sources: the product code "KX" used for MHI's commercial-use multi-type air-conditioners, and the first letter of the word "king."