This Diwali, don’t be surprised if an appliance you were eyeing is out of stock. With slower movement of products and components from supplier nations such as China, finished goods stocks are running low across the country.
Among products, air-conditioners and televisions are the worst-hit segments, with government rules barring import of certain products. The partial restriction on imports comes right ahead of Diwali sales, which account for close to 30-35 percent of the annual revenue for consumer appliance firms.
Adding to this, Coronavirus-induced restrictions on flights and closer scrutiny on shipments from China at ports are also delaying arrival of components and finished goods.
Moneycontrol gives you the lowdown on the exact reasons stocks of appliances are in short supply:
Import ban on TVs and ACs
After a July 30 notification by the Directorate General of Foreign Trade (DGFT), which placed import of colour televisions of all sizes in the restricted category, import licences are being granted only to select brands.
High-end television sets that are 80 inches and above are typically imported from other markets. Since there is a call to boycott products from China, there is an expected shortage of the panels that form the front screen of a television set.
A similar trend is being seen in air-conditioners. The DGFT has banned import of fully-built air-conditioners from abroad and this will impact AC sales in India. Close to 65 percent of ACs are made in India, with components such as refrigerants being imported from China. However, 35 percent of ACs are completely imported and this category will see a hit.
Lockdown-related delays, anti-China sentiment
While India is in the unlock phase, commercial flights and port movement is not fully open. Dealers told Moneycontrol that several markers in South-East Asia, including Taiwan, Vietnam and parts of China, have reported a delay in production.
Amidst the festive sales, this production delay is leading to a dearth of finished appliances. Another cause for delays in the arrival of components for appliance production is that shipments from China are still being closely inspected. This often leads to delays in these components reaching the production facility.
What are companies doing?
Brands, including Samsung, Siemens, LG, Bosch and Xiaomi, are rushing to meet the demand for the Diwali sales.
Here, the thrust is to get the licences to import high-end television sets ahead of the festival. Industry sources said that brands such as Samsung have already received their consignments while a few others are waiting for the product.
Similarly, brands such as Thomson and Kodak have ramped up local production facilities to meet the needs of customers. Apart from televisions, Thomson also sells washing machines in India.
Component price increases
Due to the shortage in supply amid high demand, key components such as compressors and open-cell panels have seen close to a 20 percent increase in prices since October. This pushed up the overall production price for consumer durables firms.
Under regular circumstances, the rise in costs would be completely passed on to customers in the form of a price hike of products. However, these firms have taken a call to look for alternatives for these components. Entering into commercial deals at the last minute is another reason for delays in production.
How long will the deficit continue?
Some deficit in stocks of air-conditioners and large-screen televisions is expected to continue till mid-December. Once there is clarity on availability of a vaccine against the Covid-causing coronavirus, and complete opening up of international flights, the situation should see a turnaround.