As the rupee has been on a downward slide and crossed 90 a dollar, consumer electronics firms are looking to raise prices of products ranging from air conditioners (ACs) to television panels up to 10 per cent.
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The appliance makers expect a good churn in the festive season, led by the government's proposal to reduce the GST slab on air-conditioners from the current 28 per cent to 18 per cent, which will reduce the price from Rs 1,500 to Rs 2,500 depending on the models.
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Kamal Nandi is a relieved man. As vice-president (sales & marketing) of Godrej & Boyce Manufacturing, Nandi has been seeing sales back on track for the last two months.
"The December and February stimulus packages, which included a cumulative 4 percentage point excise duty cut, have helped the industry register this growth," said Nandi, adding that the festive season would bring more cheer, unlike last year, when the slowdown was taking effect.
Consumer durables retailers and manufacturers may end up bearing the cost of the Reserve Bank of India's (RBI's) tightening on easy personal loans, as their margins are expected to be impacted by higher borrowing costs. During the recently passed festival season, consumer durables companies started offering longer tenure loans, zero down payments, and zero interest on a wider assortment of products than ever before, making the products more affordable. While 18- and 24-month easy monthly instalment (EMI) options were available earlier, companies offered them only on select products; now, they are being extended to a larger section of products.
Consumer durables firms and fashion retailers expect double-digit growth in value terms in the ongoing festival season as consumers have stepped up purchases during this period. They expect to see value sales growth upwards of 15 per cent, which is especially coming in from cities. However, volume growth may lag behind value growth.
With Onam and Raksha Bandhan just around the corner, the festival season is ready to kick off in full swing. As people embrace the celebratory spirit, companies anticipate a surge in sales this year. Consumer durables firms are expecting strong growth of 40-50 per cent in the premium segment during the upcoming season. Appliance makers also foresee increased demand for cooling appliances - refrigerators and air conditioners - which were impacted by unseasonal rainfall.
Consumer durable companies will again start to face a supply issue of components as China extends lockdown due to its zero Covid strategy. This will impact the flow of finished products into the Indian market, unlike last year, this impact will be felt post Diwali. While supply chain issues have been a problem since the start of the pandemic, China's zero Covid strategy has also posed another risk for consumer durable companies.
The latest hike is likely to be followed by another such move next month, said industry players. Before the latest hike, companies had initiated price hikes to the tune of 12-13 per cent in 2021 but they weren't able to fully cover the increase in costs.
Maharashtra, which contributes between 12 and 15 per cent of appliances sales, announced lockdown-like curbs, meaning there will be no business for the second half of the month as well from the state.
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Panasonic India is set to increase the prices of its products by up to 7 per cent, while some others players have already increased it.
Categories such as washing machines, refrigerators and television sets have seen sales growth of around 8-10 per cent in August compared to last year, industry sources said, with September also reporting a similar growth trajectory.
The added burden on manufacturers for recycling e-waste is expected to impact their margins, which may further lead them towards hiking prices of other items.
Some companies argue that the culture of staying, working and learning at home will persist for a while, altering lifestyle habits of consumers.
The Rs 1.5-trillion-a-year industry has ended the year with a 30 per cent fall in sales because after a steady recovery in the festive season, multiple factors dashed its hopes of revival at the end of the year.
With consumers staying indoors and e-commerce firms extending their reach to a larger number of pin codes, these giants have snatched a larger share from the offline traders this season.
The festival season has already begun in the west and south of India with Ganesh Chaturthi and Onam, respectively, and consumer companies are witnessing a pick-up in sales compared to pre-Covid levels. Retailers, fast-moving consumer goods (FMCG) and consumer durables companies expect their sales to grow in double digits this festival season compared to pre-pandemic times, as there are no curbs on movement now. Adani Wilmar expects sales volume to be higher by 15-20 per cent as rural India has largely witnessed good monsoon rains, and employment has picked up in urban areas.
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India on Sunday announced temporary suspension of e-visa facility for Chinese travellers and foreigners residing in the neighbouring country and issued a fresh advisory saying anyone with travel history to China since January 15 can be quarantined.
'While most companies were bullish before the second wave of double-digit sales growth in FY22, that may not be the case now.'
While FMCG companies were not barred from carrying out their operations during the 21-day lockdown, since most manufacture staples and essential products, capacity utilisation remained poor, owing to the restricted movement of raw materials, finished goods, and labour.
As the rupee continues its freefall against the dollar, cars, TVs, washing machines and other home appliances are set to cost more with companies set to hike prices to offset impact on their margins.
Since April, India has seen multiple strains of the coronanavirus sweep the nation, upending life and businesses alike. Out-of-home retail and discretionary categories such as durables, auto, fashion, lifestyle, hospitality, food services, travel, and tourism have been the worst-hit as Covid cases remain high, leaving state governments with no option but to curtail mobility and economic activity.
Consumer durable firms, including Haier, Whirlpool, Panasonic, Godrej Appliances and Daikin, are increasing prices of their products by up to 5 per cent following the withdrawal of excise duty sops, coupled with high input costs.
Prices of all metals - from steel to copper, aluminium, zinc and lead - have shot up by about 5-11 per cent in the past month. Commodity inflation is raising its head, forcing companies to consider price hikes.
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Consumer Electronics and Appliances Manufacturers Association Consumer has also welcomed the move saying the it would improve the sentiments and strengthen the growth.
But it may come with a downside risk of further rise in prices of several products.
The rupee's slide to a two-year low will impact consumer durables and electronics companies, as the import content in their products tends to be high
According to the order, all factories producing essential goods and services will remain operational at full capacity.
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Makers of air conditioners, beverage and ice-cream are hopeful of a boost in sales
With states in north India imposing stricter measures to curb intra-state movement after April 20, makers of summer products such as air conditioners, refrigerators, colas, and ice creams are estimating a 25-60 per cent drop in yearly sales.
From the rollback of customs duty on key electronic components to fast tracking delivery of goods imported from China, players are looking for incentives on several counts.
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Fridge, washing machine, and paint makers are expected to cut prices shortly, while TV, aircon, and sanitary napkin makers are a disappointed lot
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