Lower crude, rupee rate have no impact on consumer durables makers

Price hikes continue mainly because of higher Customs duty on appliances

The drop in crude price and rupee rate over the one and the half month has had no impact on input costs of consumer durables makers. 

Unlike FMCG firms, who’ve halted their second round of price hikes for now, durables makers will continue to raise product prices mainly because of higher customs duty on home appliances, senior executives across companies told Business Standard. The rupee also continues to be above the 67-68 level to a dollar at which costs were earlier benchmarked, executives said, putting pressure on margins.

“We have just increased card rates (product prices printed on paper) by 7-10 per cent for our premium range of home appliances, which are imported into the country,” Eric Braganza, president, Haier Appliances India, said. “For our mid-range of appliances, the increase is to the tune of 4-5 per cent,” he said.

Most other brands, including LG and Samsung are expected to follow suit in the coming weeks, industry sources said, increasing prices by at least 3-5 per cent across categories, such as washing machines, refrigerators, and microwave ovens. Air conditioner (AC) makers, on the other hand, are expected to take sharper hikes in December, when their new inventory for the 2019 season will be ready. This is because of the higher import content in them.

According to Mumbai-based brokerage Edelweiss, around 30 per cent of the Rs 200-billion domestic AC market is made up of imported products, higher than washing machines and refrigerators. Imports for the three categories mainly come from China and Thailand, though others such as Taiwan, Korea, and Japan also contribute to an extent, experts said.

In September, the Centre had raised basic customs duty on refrigerators, ACs, and washing machines with a capacity of less than 10 kg by 10 per cent, taking the overall levy to 20 per cent. Customs duty on compressors for ACs and refrigerators was also raised to 10 per cent from 7.5 per cent, while audio speakers saw duty go up by 5 per cent to 15 per cent (from 10 per cent earlier).

Most manufacturers had taken a price hike soon after the Customs duty hike in September, but had delayed implementation owing to the onset of the festive season (in October). “That hike will be implemented now,” Kamal Nandi, executive vice-president and business head, Godrej Appliances, said. “As the trade discounts and subsidies, which were given during the festive season are withdrawn, prices would correct reflecting the hike taken before the (festive) season began. This should help in easing pressure on margins to some extent,” he said.

Since September last year, consumer durable makers have taken at least three rounds of price hikes to tide over challenges emerging from volatility in the rupee. While Customs duty hikes first began in December last year and were subsequently undertaken in February and September, experts say it may not cease as the government looks to boost local manufacturing by curbing imports.