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Last Updated : Dec 24, 2018 07:50 PM IST | Source: Moneycontrol.com

Cost pressures hit growth for consumer durables firms in 2018; new launches to dominate 2019

Considering that 2018 has been a tough year for white goods companies, they will make up for the lost sales opportunities in 2019

M Saraswathy @maamitalks

Consumer durables firms faced a rise in manufacturing costs, hit by a double whammy of higher rates of taxation as well as the depreciation of rupee against the US dollar. Faced by a rise in input costs, consumer durables firms were forced to raise prices by 5-7 percent almost twice in 2018.

Here are the top events that shaped the sector in 2018:

Customs duty hike

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Customs duty was doubled for a category of white goods including air-conditioners, washing machines and refrigerators in September 2018. The government doubled the basic customs duty on air conditioners, washing machines (up to 10 kg) and refrigerators to 20 percent (from 10 percent). This led to one round of price hikes.

GST reduction

After a series of meetings with consumer durables firms, the goods and services tax (GST) Council reduced the rate of taxation on several products including televisions (up to 27 inches), refrigerators, food processors and washing machines from 28 percent to 18 percent. This had led to an 8-10 percent decrease in prices of these products. Just before Christmas, the GST on televisions (up to 32 inches) was slashed to 18 percent from 28 percent.

Rupee depreciation

The Indian rupee was on a downward spiral against the US dollar ever since July 2018. It also neared the 74-mark against the dollar in October. Since raw materials for appliances are imported from abroad, a weaker rupee meant costs were under pressure.

Unseasonal rains

There were unseasonal showers in parts of North India in March and April 2018. As temperatures dipped in several regions so did air-conditioner sales. The summer months (March to May) account for 75-80 percent of AC sales for appliance makers.

Fuel price hike

Prices of petrol and diesel continued to stay high throughout the year due to global crude. On October 3, oil prices touched a four-year high, with Brent crude at $86.74 a barrel. Since the appliances industry is dependent on the logistics and transportation industry to move raw materials and finished goods from one place to another, oil price fluctuations impact the business.

Trends for 2019

Considering 2018 has been a tough year for white goods companies, it is likely that companies will try to make up for the lost sales opportunities in 2019 by bringing out a new range of products at attractive rates. Here are the top trends that will dominate the sector in 2019:

Larger TVs

Both rural and urban markets in India want larger television sets at home. With a majority of appliances being sold on e-commerce portals, the base price of large-screen (40 inches and above) televisions dropped considerably. The market will see more white goods makers launching 100 inch plus televisions in 2019. In terms of technology, 4K will rule the market.

CFL to go extinct

CFL lights that have slowly been replaced by LED lights may go completely missing from the market in 2019. Globally too, several large players like General Electric have already taken a decision to pull the plug on CFL lights. Environmentally conscious companies have taken a call to significantly reduce their CFL exposure and turn to LED bulbs, which conserve energy and come at a similar price-point.

Small appliances

With more number of people entering the workforce, appliances to make daily chores simpler will be on the rise. Among these, smaller appliances for the kitchen could rule the roost. From air-fryers to coffee machines that also double up as toasters, the market is set to be flooded with products to make life easier. The key focus, said companies, will be a focus on healthy eating and the amount of calories consumed.

Appliances to get smarter

Multinational companies like Samsung and Panasonic have already started to design products that use artificial intelligence to give a better customer experience. Continuing with that trend, appliance makers will offer products that not only will be smarter, one device can replace several others. The catch here is not all of them will be affordable to the masses.

Taxes could be lowered

Products like air-conditioners are still taxed at the highest rate of 28 percent under the GST regime. Despite multiple requests by the companies, the tax rate has not been cut. However, it is anticipated that ACs, no longer regarded as a luxury products, may get a tax breather in 2019. This could marginally bring down the price of the products.

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First Published on Dec 24, 2018 07:50 pm
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