In FY18, the GST launch played a dampener during the festive season because most appliances were taxed at 28 percent
Appliance makers expect a 50 percent year-on-year (YoY) jump in sales at Rs 10,000 crore during the ongoing festive season, that began with Onam in August and continues till the year-end.
During the festive period lasting nearly four months, companies offer discounted products and attractive financing options for customers.
However, rising fuel costs and rupee depreciation may keep discounts low between 5-10 percent this year. Since a majority of raw materials for white goods are imported, a dip in the rupee impacts manufacturing costs.
Last year, the introduction of goods and services tax (GST) had played spoilsport. The rate of taxation on finished goods increased by almost 5 percent causing a crash in sales. Consumers either already bought the products at a lower rate in anticipation of GST or postponed their buying decisions to await a price cut. As a result, festive sales dropped almost 20 percent to approximately Rs 6,000 crore in FY18.
Kamal Nandi, Business Head and EVP, Godrej Appliances said the company is targeting a 30 percent growth in sales as compared to the same period last year. He said the pre-GST sales had wiped off the Diwali gleam last year.
“We are upbeat about the forthcoming festive season with the launch of 40 new models across categories. As the brand marks 60 years, we are also offering a unique opportunity for our consumers to take home our premium product range under very attractive finance schemes,” he added.
Heavy rainfall and floods that lashed Kerala in July and August led to heavy loss of life and property hitting the sales of durables.
But Nandi said pent-up demand will work in their favour, despite high fuel prices pinching pockets and depreciating rupee creating pricing pressure for appliance makers.
Onam sales are estimated at Rs 1,000 crore every year but this year sales were minimal since people had to spend on rebuilding their homes.
Dealers told Moneycontrol that both Kerala and Karnataka are seeing a bounce back in appliance sales.
"There is a cash crunch that is clearly visible. But several companies have tied-up with non-banking financial companies to offer personal loans as well as products on EMI," said the Southern region head of a large appliances store.
After a series of discussions, the GST Council on July 21 decided to slash rates of several products in the white goods category. This came as a surprise for consumers ahead of the festive season.
GST was reduced on products like televisions (up to 27 inches), refrigerators, food processors and washing machines from 28 percent to 18 percent.
Sunil Shankar, Business Head, AC and LED Panels, Onida (Mirc Electronics) said the reduction in GST rates from 28 percent to 18 percent on washing machines and televisions (up to 27 inches) would also help to increase the demand for televisions and washing machines.
The base effect will also play a role in the festive sales growth in FY19. Shankar added the GST-migration effect of last year will play out in their sales growth this year.
Electronic goods companies have been forced to raise prices due to the fuel price jump and rupee depreciation. Nandi said prices were up 3.5-4 percent.
However, the price increase was offset by a reduction in the prices of goods after the GST cut. So, in reality, the final price increase is still lower than the earlier rates applicable.
During the last 10 years, the Indian domestic appliances market grew by nearly 9 percent (CAGR), surpassing the overall 3 percent growth of global white goods market.
New products, discounts on offer
Air-conditioner segment major Voltas and Turkey-based Arçelik have launched a consumer durables brand, Voltas Beko. The new company, Voltbek Home Appliances has introduced a wide range of home appliances which include refrigerators, washing machines, microwaves, and dishwashers in time for the festive season.
Voltbek plans to launch over 100 products over the next three months including 44 units of refrigerators, 40 units of washing machines, 12 units of microwaves/ovens and seven units of dishwashers.
Similarly, Godrej Appliances is launching 40 new models across categories, the bulk of which belong to the premium frost-free and fully automatic segments.A lot of gifts and discounts are also on offer. Onida consumers will get an assured gift or a 30 percent discount on their next purchase. Shankar said the total worth of the gifts and offers during the festive season would be Rs 50 crore.