Sale of products during the Diwali week will enable appliance makers to wipe off past losses
The festive season cheer has been muted for consumer-led sectors like automobiles. But white goods firms that have seen a partial impact of slowdown from rupee depreciation, commodity price hike and increase in customs duty are pinning hopes on the Diwali sales to perk up the revenue numbers.
Due to an increase in the cost of manufacturing due to rising fuel prices and in the cost of raw material imports, appliance makers were forced to increase the prices of finished goods. This played a partial dampener in the sales since customers postponed their buying decision.
Sunil Shankar, Business Head, Mirc Electronics (Onida) said Diwali sales had been a mixed bag for them.
“We witnessed good sales during the nine days of Navratri with a decent growth of 15 percent. After Navratri, the sales tapered down but we are expecting good secondary in the next seven days,” he said.
The company expects a growth of 12-15 percent even though the market sentiments are not as per expectations due to various macroeconomic issues.
Industry sources said compared to sectors like auto where the customer needs to make significant savings to purchase vehicles, white goods are affordable. In fact, during special sale days on e-commerce portals like Flipkart and Amazon, television brands are said to have seen a big growth in their revenue.
For instance, Thomson said there was a sharp rise in sales during the Flipkart Big Billion Days Sale. The company said they have sold more televisions than some of leading Japanese and Korean brands.
The sudden floods in Kerala just during the onset of the festive season had led to sales seeing a drop across the state. White goods companies made little or no sales during Onam which is the biggest festival of Kerala.
Almost 40 percent of raw materials are imported from the Western market. Since the rupee depreciated against the US dollar continuously from the beginning of the financial year, production costs surged by almost 10 percent.
Kamal Nandi, Business Head & EVP, Godrej Appliances said Onam has been a washout for the industry this year due to the Kerala floods in the month of August.
“The GST rate reduction from 28 percent to 18 percent in July was a welcome boon for the industry. Since then due to Rupee depreciation, fuel price increase and recent import duty hike, we have been forced to increase prices by 3.5 percent to 4 percent,” he added.
However, when compared to summer, the effective prices are still almost 4 percent lower due to which some pent-up demand might work in their favour, fueling consumption this season.
For multinational companies, the customs duty hike also came in as a surprise. The government doubled the basic customs duty on air conditioners, washing machines (up to 10 kg) and refrigerators to 20 percent making them 5-8 percent costlier.
Price hike post festive season
While home appliance makers increased prices in September and October, the cycle of increase is not yet over. There is a momentary pause till the mid-November for customers buy products.
Nandi said the certainty of post-festive hike in prices for some categories should ideally help drive festive sales. He expects sales to pick up this week of Diwali, delivering a cumulative growth rate of 20-22 percent for the company.
How other sectors fared
Car and SUV makers reported a muted growth for the fourth straight month in October as buyers stayed away from showrooms and bookings failed to get converted into confirmed sales.A significant rise in insurance premiums, rise in fuel prices and hike in interest rates affected off-take at the retail level. Fearing overstocking, dealers refrained from placing orders for new inventory during the period.