Despite weak metal prices, consumer durables maker LG Electronics is contemplating a third round of price increase, since January this year, due to margin pressures.
“We are increasing prices for the third time this calendar year from June 16, across categories, by 1.5 to 2.5 per cent, depending on the product category. We increased prices twice since January by a total of 7.5 per cent due to escalating metals prices and hike in excise duty,” says Amitabh Tiwari, head of sales at LG Electronics.
Metal companies started increasing prices from December 2009. Prices of hot-rolled coil (HRC), a benchmark for flat steel used by white goods makers, are ruling at about Rs 32,000 a tonne, down by Rs 2,000 over the last month. With the Euro crisis, the market has dampened, but consumer durable majors are unable to cash in on the weakness. “Metals prices may have just started softening but we buy for at least three months in advance. So, we purchased when the raw material prices were at its peak, and any softening in input costs now will take a while to benefit us,” says Tiwari.
Since January this year, with the increase in metals prices, all consumer durables companies which manufacture in India, have increased prices by 1.5 to 7.5 per cent, which is Rs 280 to Rs 15,000, depending on the product category. The increase in excise duty announced in the Union Budget, from eight per cent to 10 per cent, was also passed on to the consumer.
However, most other consumer durables companies are not looking at any immediate price hike. Kamal Nandi, VP-marketing, Godrej & Boyce, says: “The commodity prices are now stabilising and so we would not increase prices immediately. Earlier we thought we would take a third round of price hike in June, given the way commodity prices had hardened. However, the fact that we are not increasing prices of products once again does not mean we are not under margin pressure or the commodity softening will provide us any relief immediately.”
Godrej and Boyce had effected a four per cent hike, first by two per cent in January due to increase in metal prices and a second time by another two per cent in March with increase in excise duty. Samsung, on its part, is looking at ‘maintaining’ the prices as of now. A spokesperson for Samsung Electronics India, says: “We are going to maintain the current price levels. We increased prices by three to five per cent in March, depending on the product category.” Since January this year, prices of consumer durables have seen a rise ranging between Rs 280 for a low-end refrigerator and around Rs 15,000 for a top-end television. Microwaves have been spared, as the duty has been reduced from 10 per cent to five per cent on the key component, magnetron.
