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The ₹2,000-crore electric water heater segment is set to de-grow by 6-7 per cent this winter between October and December compared to last year.
The category has already been on the decline year-on-year with real estate sales coming down, but now factors such as milder, shorter winters and low consumer sentiment are adding to its lack of growth.
“Consumers are spending less and postponing due to weak sentiments after demonetisation and GST. However, being a market leader we have to expand the category. There has been marginal growth at 1-2 per cent during October and November but we expect the category to de-grow 6-7 per cent in the last quarter of 2017 over the previous year,’’ said V Ramnath, Managing Director, Racold Thermo.
The market leader in water heaters is also planning to move consumers way from using unsafe heating methods like immersion rods and gas and create further penetration.
With GST at 28 per cent, the companies have already raised prices by 3-4 per cent since they also had to bear the increase in commodity costs. “Pricing is not an issue, despite GST at 28 per cent, but creating awareness and penetration are some of the challenges as well as opportunities for the category,’’ added Ramnath.
With players like Racold and Bajaj Electricals comprising nearly half of the organised electric water heater category, other regional players like V-Guard, Havells and Venus are also trying to create more penetration.
“Winters are getting short and new demand seems to have dried up for the category since the real estate sector has slowed down. We are expecting flat growth rates for the category since the number of homes being built has reached a rough patch,’’ said Mithun K. Chittilappilly, Managing Director, V-Guard.
The market for the season-led electric water heaters is mostly in the urban markets in North and South India. Since the replacement period is usually long for the category ranging between eight and 12 years, it is a relatively slow moving category compared to other durables.
“While there is some amount of replacement demand, it is new demand which has impacted the category in the past two-three years,’’ added Chittilappilly.
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