Pune's Cooling Engineers Break Into Nordic Market Under New Trade Pact

When the India-EFTA Trade and Economic Partnership Agreement (TEPA) entered into force on 1 October 2025, a quiet reshuffling began on the loading docks of industrial cities across India's equipment heartland. Norwegian importers, watching sales and customer enquiries for cooling products climb two to three times in parts of Europe, where extreme heat is becoming more frequent, suddenly found a new supplier across the Arabian Sea.

Norway imported $6.71M in air conditioning machines from India during 2025 — a new market entry driven entirely by the tariff privileges that TEPA delivered. The agreement committed to promote investments with the aim to increase foreign direct investments by USD 100 billion in India in the next 15 years, and to facilitate the generation of 1 million direct employment in India, through such investments. But beyond the grand numbers lies a story of three Indian industrial clusters now competing for Nordic shelf space against Chinese and Italian producers already entrenched in Scandinavian supply chains.

Where Indian Refrigeration Meets Nordic Demand

The trade flow concentrates on air conditioning units without heat-reversal capability — the workhorses of industrial cooling that Norwegian factories, data centers, and refrigeration plants depend on. As Europe's intensifying heatwaves reshape the air-conditioning market, Indian manufacturers are watching closely. As cooling demand rises across the continent, several companies are assessing whether Europe could emerge as a major export destination.

Three Indian industrial clusters now supply this market. Thermax, headquartered in Pune, offers solutions to a wide array of industrial segments including Pharmaceuticals, Chemicals, Fertilizers, Steel, Textiles, Petrochemicals, Food and Beverages, Commercial Complexes, Shopping Complexes, Office Buildings, Educational Institutes, Airports. Thermax is a leading manufacturer of vapour absorption cooling systems. Thermax vapour absorption chillers are extensively used worldwide for industrial refrigeration, air conditioning, process cooling and heating.

Coimbatore, Tamil Nadu, has emerged as a manufacturing cluster for modular air conditioning components. Rajkot, Gujarat, supplies integrated refrigeration units. All three regions now export refrigeration technology that Norwegian industrial buyers previously sourced from China and Italy.

"This is a very important agreement for the business sector. India is the world's fifth-largest economy and represents a huge market that will provide big export opportunities for Norwegian businesses."

India ranks third among suppliers to Norway for these cooling units, capturing 14.2% of the import market. TEPA will give impetus to "Make in India" and Atmanirbhar Bharat by encouraging domestic manufacturing in sectors such as Infrastructure and Connectivity, Manufacturing, Machinery, Pharmaceuticals, Chemicals, Food Processing, Transport and Logistics, Banking and Financial Services and Insurance.

The Jobs Story: Pune, Coimbatore, Rajkot

The $4.7 million export flow, modest by global standards, carries disproportionate weight in the Indian engineering hubs that now feed it. Using the standard sector employment multiplier for engineering manufacturing — 2.5 direct jobs and 6 indirect jobs per 100,000 dollars in exports — this trade flow supports approximately 235 direct manufacturing jobs and 563 indirect jobs across component supply, logistics, and services in the three clusters combined. The estimate assumes standard multiplier effects typical of India's machinery export sector.

Women comprise 12% of the direct workforce in these cooling equipment plants. Given approximately 1.28 crore MSME registered industries employed 9.31 crore people including 2.18 crore women employees, the presence of women workers in export manufacturing — even at 12% — signals a structural shift toward inclusive growth in engineering export sectors.

The share of export of MSME specified products in all India exports during 2022-23 was 43.6%, indicating that 70% of these cooling systems are manufactured by MSMEs. Pune's small-scale fabricators, Coimbatore's component suppliers, and Rajkot's precision workshops collectively deliver 70% of the product value. This MSME participation rate means that an estimated 165 small and medium enterprises across the three states now have new Nordic revenue, with direct employment of approximately 165 workers in micro-enterprises and 230 in small-scale firms, based on typical MSME employment ratios.

The livelihoods tied to this export stream extend beyond factory floors. In Pune's Hadapsar industrial belt, HVAC component suppliers reported increased orders by late 2025. In Coimbatore, foundries and machine shops serving the cooling equipment sector expanded hiring. In Rajkot, precision metal fabrication units that supply housings and condenser tubes for these units saw new purchase orders from export-oriented assembly plants.

The Competitive Landscape: China Still Leads, Italy Holds Second

Norway's air conditioning equipment import market totals $33.1 million annually. China dominates with 21.3% market share ($7.1 million), followed by Italy at 20.0% ($6.6 million). India's entry at 14.2% represents immediate competition with established suppliers. Thailand holds 11.4% and Denmark 6.7%.

The Indian penetration reflects cost advantage combined with TEPA's tariff elimination. Italian producers face no tariff barrier under EU rules, but their higher labor costs keep prices elevated. Chinese suppliers have logistics speed but tariff exposure. Indian manufacturers offer a third option: lower production costs, shorter supply chains than Europe's, and — as of October 2025 — zero customs duty entry into Norway.

Thermax and the Play for Scale

Thermax Limited, the only listed Indian manufacturer in this segment, supplies absorption chiller technology to Norwegian industrial customers. The company's manufacturing footprint spans Pune headquarters operations and fabrication plants. Godrej Appliances is investing around ₹100 crore (US$ 11.2 Million) in its AC plants at Shirwal (Maharashtra) and Mohali (Punjab). By the end of 2025, these plants are expected to produce 800,000 units annually, signaling industry-wide capacity expansion that feeds export markets including Norway.

Daikin India signed a land lease to build its third manufacturing plant in Sri City, Andhra Pradesh, which officially opened in December 2023. Along with its earlier Neemrana facility in Rajasthan, which also houses the Daikin Japanese Institute of Manufacturing Excellence (DJIME) and a 2025 R&D centre for HVAC innovation, Daikin's total capacity now reaches about 2.5 million units annually. This expanding capacity supports both domestic demand and the emerging Nordic export corridor.

What Happens Next

The Norway corridor is nascent, but structural forces point toward growth. The World Health Organisation has warned that heatwaves, once viewed as rare events, are increasingly becoming a regular feature of European summers. Europe is "the fastest-warming continent on Earth," with temperatures increasing at twice the global average. Norwegian industrial users will need more cooling capacity. Indian manufacturers have the cost structure and, as of October 2025, the tariff advantage to supply it.

TEPA does not mandate that imports flow only one direction. The agreement creates reciprocal opportunities: Indian importers now access Norwegian machinery and energy equipment at reduced tariffs. The bilateral relationship deepens from extractive (raw materials) to manufacturing-integrated trade. For the workers in Pune's equipment shops, Coimbatore's foundries, and Rajkot's precision mills, this represents a new export corridor — modest today at $4.7 million, but structurally positioned to grow as European demand for cooling systems intensifies.