Amidst the coronavirus (COVID-19) pandemic that has led to production shutdown, rupee depreciation could lead to another round of price hike in India's consumer appliance segment. Sources told Moneycontrol that prices of appliances could go up by 8-10 percent as soon as sales of white goods resume.
Due to the lockdown across India to avoid COVID-19 spread, sale of non-essential items including consumer durables has been temporarily suspended. With the global uncertainty around coronavirus, Indian rupee has fallen further and is trading at 75.4 against the US dollar. Rupee had closed at 74.89 on March 27.
Customers will feel the pinch immediately, as companies are already grappling with higher costs of product and component import from other countries.
Appliance makers had already increased prices in February/March after COVID-19 related lockdown had led to factories in China shutting down. This had halted supply of key components to Indian factories. Even now, production in China has only partially revived.
“This will be the second price rise in three months. However, we are forced to do this because manufacturing costs are on the rise,” said the head of consumer appliances at a large electronics firm.
Even though a majority of appliance companies manufacture products in India, key components like panels, air compressors and hydraulic motors are imported from abroad. When the value of the Indian rupee depreciates against the dollar, the cost of importing goods goes up.
The disruption in the supply chain is coinciding with the onset of the summer season, when consumers in India start buying appliances such as refrigerators and air conditioners.
The earlier an appliance is bought, the cheaper it is. With the absence of key components to produce the goods, there has already been delays in production and a mismatch in demand and supply. Added to this is the constant slide in the rupee.
On March 13, Godrej Appliances announced a 2-3 percent price hike in air conditioners from March second half.
Kamal Nandi, Business Head and Executive Vice President - Godrej Appliances and President of Consumer Electronics and Appliances Manufacturers Association, said that the short supply of components, increase in customs duty and higher logistical cost of air lifting components are key triggers for the price hike.
Importing a finished product is expensive since the government has imposed a 20 percent import duty on completely built units that are brought in from other countries. With import being ruled out as a temporary option to mitigate the dearth of products in the market, a price rise is the only option.
The duty for importing a completely built unit of an electronic appliance is set at 20 percent. This was doubled from 10 percent in the budget presented in July 2019.
For customers, this will be a double whammy since a lockdown has led to appliance retailers suspending operations on one hand while prices will quickly go up on the other.
Highly anticipated online sales through e-commerce platforms have also been postponed because of the inability to deliver these items.