Despite a dip in consumer spending this festive season, consumer durables manufacturers are mulling another round of price hike to protect their margins.
The Boston Analytics Consumer Sentiment Index for the last month fell below the benchmark value of 100 since its inception, signalling a low-key festive season ahead.
Earlier this year, rising input costs and lack of incentives in the Union Budget had compelled durables manufacturers such as Samsung, LG and Onida to effect two rounds of hikes.
These firms rued that the depreciating rupee and global financial crisis were adding to their woes and they might be forced to raise prices again. The Rs 32,000-crore consumer durables industry imports inputs such as pre-coated sheets, plastics, chemicals used for foaming and custom-built units (CBUs) such as LCD and plasma televisions which now cost more. Till September, Customs duty on these materials was around Rs 43 which now stands at around Rs 47.
“The depreciating rupee has a negative impact on traded products and is putting tremendous pressure on the bottom line. While we are trying to absorb the impact through sourcing efficiency, some of the burden will have to be passed on to the consumers,” asserts George Menzes, COO, Godrej Appliances.
Incidentally, manufacturers had expected the Sixth Pay Commission recommendations to increase the purchasing power and fuel demand further.
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But delayed summer and early rains, especially in North India, affected air-conditioners sales that grew by 10 per cent compared with 25-35 per cent last year. However, the input cost pressure is prompting consumer durables manufacturers to mull price hikes of close to 3 per cent despite sliding sales.
With imports becoming more expensive, LG feels price corrections cannot be ruled out.