With the curtain falling on Diwali and related festivities, consumers of durables will be in for a few jolts.
Makers of these products, who wooed customers ardently during the festive season with freebies and discounts, will be raising prices shortly, in response to input cost pressures and increase in prices of imported components by Chinese original equipment manufacturers (OEMs).
A very high number of consumer durable companies, especially manufacturers such as Onida, Godrej and Videocon, depend largely on Chinese-made components and semi-finished products, imported and then assembled locally.
OEMs in China have been increasing prices steadily in the past two months, on account of the growing demand for consumer durables in India, says George Menezes, chief operating officer, Godrej Appliances. “The price hikes by OEMs have been steep,” he says. “As high as 20-22 per cent for both semi-finished products and components. Prices hikes are inevitable.”
Menezes says a three per cent price rise decision in products across categories will be taken by the company in the next few weeks. Executives from Onida and Videocon couldn't be reached. But trade sources say these firms will not be behind in raising prices.
The country's largest consumer durables player, LG, will increase prices of its refrigerators, washing machines, air conditioners and microwave ovens by three per cent, said the firm's national sales head, Amitabh Tiwari. “This will come into effect from December 1,” he said.
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Though Samsung's deputy managing director, Ravinder Zutshi, says his firm will not effect any price rises, persons familiar with the development say this is not likely to be the case, given that most companies will be taking price increases in the near future.
Trade sources say Samsung raised prices by two-three per cent in categories such as refrigerators and washing machines in the middle of October. There could be one more round, they say.
Input costs
Besides the increase in imported components, cost of inputs such as steel, copper, chemicals and polymers have also gone up by seven to 10 per cent in the past few months, says Menezes of Godrej. “This is also a contributing factor to price hikes,” he adds.
The only input which hasn't rallied in the past few months are flat panels, whose prices have come down by 13-14 per cent, says Menezes. “This is the reason why prices of LEDs (light emitting diode television), LCDs (liquid crystal display television), CRTs (cathode ray tubes) and home entertainment systems will not see a price hike,” says Tiwari of LG.
The reduction in prices of flat panels, in fact, saw consumer durable companies offer heavy discounts on these products during the festive season. A 32-inch LCD television set, for instance, whose cost was Rs 32,000 earlier, was being offered for Rs 20,000, say trade sources. The trend was no different with LEDs and home entertainment systems.
Tiwari of LG said the likely growth in sales of flat-panel TVs this festive season would be closer to 110 per cent, way above the projected mark of 75 per cent, making it the highest contributor among durable categories during the period.
Frost-free refrigerators would see growth of 50 per cent: the earlier target was 35 per cent. Automatic washing machines (both front-loading and top-loading together) would also go past the earlier estimated growth mark of 30 per cent by another 1,500 basis point to 45 per cent this festive season, he said.