Having suffered an unprecedented sales decline of 6-7 per cent in 2019-20, the industry will be up against challenges in both supply and demand sides due to the coronavirus pandemic.
Appliances and consumer electronics industry may see 50 per cent decline in sales in April-June due to the lockdown, but a recovery is expected in the second quarter when festive sales begin, a top official of Panasonic India said.
Having suffered an unprecedented sales decline of 6-7 per cent in 2019-20, the industry will be up against challenges in both supply and demand sides due to the coronavirus pandemic, Panasonic India and South Asia President and CEO Manish Sharma said.
“Demand in Q1 might be half of which it should be. In April, it may be only 25 to 30 per cent of the normal demand. While in the month of May, it would be half of the normal demand,” he said.
It would take at least three more months for the appliances market to get back to normal, Sharma added.
“That's how Panasonic is preparing for itself. The market demand would shape up and we are looking at Diwali, for the situation to normalise,” he said.
Commenting on the impact of the ongoing lockdown, he said in March there was a decline of 35 per cent in sales, which in turn had a huge impact on annual sales.
The impact on annual demand was that it dropped by "6 to 7 per cent, which is quite unprecedented", Sharma added.
On the recovery path, Sharma said the industry is going to face challenges “not only on supply side but also on demand side” after the lockdown.
Before the lockdown, in February and March , the appliances and consumer electronics industry was already facing shortage of components, which are primarily imported from China, thus impacting production.
Sharma said the initial indicators from China started becoming visible from February onwards and that time it was more on the supply side.
“However, China slowly resumed operations by the first week of March and almost 50 to 60 per cent capacity was in operation and then we started to face lockdown,” he said.
March is the month, when the sale of cooling products as airconditioners and refrigerators, which are necessary items, starts and in April-May it is on peak, Sharma added.
“There is a huge impact for Panasonic and the entire industry," Sharma said adding as per industry estimated most of companies have done only 30 to 40 per cent of their targets in March.
Seeking government support, he said taxes on consumer durables should be reduced to bring it into lower GST slabs to make it more affordable at a time, when people are expected to curtail discretionary spends after lockdown.
“When people would have lesser income, this essentially means that we have to make our products more affordable with a lower rate of GST for airconditioner and TV,” he said.
Sharma also suggested that the industry should ensure more component manufacturing activities in the country to ensure smooth supply and demand.
Sharma, who is also heading the Electronic & White Goods Manufacturing Committee of FICCI said it is already discussing with various stakeholders on phased manufacturing plans on components such as PCB, compressors etc.
The government is also supporting the industry, which under the new scheme has announced up to 6 per cent subsidy on the total output.
“I expect that such schemes would encourage the manufacturing of backward integration of components of our industry, which is long due,” he said.
Last month, the government approved production-linked incentives worth Rs 40,995 crore for electronics manufacturing companies.
Under the scheme, electronic manufacturing companies will get an incentive of 4-6 per cent on incremental sales (over base year) of goods manufactured in India and covered under target segments, to eligible companies over a period of next 5 years.
When asked whether sale from e-commerce channels is going to increase in the appliances segment, he said for the initial week after lockdown it would rise as people would skip visit stores, but gradually offline would bounce back.
“When it comes to appliances, for a few weeks, there would be a surge in the sale (online) which will happen immediately once the lockdown is over. This may be for a couple of weeks but then the kind of emotion which we have and the touch and feel factor, which we are used to for our purchase decisions, specially in semi urban and rural areas, it will still be again offline,”