Coronavirus outbreak: More price hikes coming up for TVs, refrigerators, ACs

Nandana James Mumbai | Updated on March 12, 2020

The extended shutdown in China is likely to have an impact on our supply chain and there is a risk of impact on the overall quantum of component supplies   -  The Hindu

The consumer durables players are gearing up for another round of price hikes if supply disruptions persist due to coronavirus.

“The coronavirus attack had a negative impact on the consumer durables sector due to its dependency on imports from China - be it for finished goods or components. We have received reports that plants in China are operating at 50-60 per cent capacity, but production has begun now. Prices for consumer durables, especially in categories like air-conditioners, televisions and refrigerators, are being revised by industry players,” Kamal Nandi, Business Head and Executive Vice-President - Godrej Appliances, who is also the president of the Consumer Electronics and Appliances Manufacturers Association (CEAMA), told BusinessLine.

Up to 3% price hike

Godrej Appliances will be taking a 2-3 per cent price hike in ACs in the second half of March. The short supply of components, increase in customs duty, and the higher logistical cost of air lifting components are the reasons he attributed to the same. Given the high seasonality of cooling categories like ACs and refrigerators, the shortage of stocks is bound to hit revenue for summer, he added.

In case of an early summer leading to early demand, there could be some shortage of ACs for a week or two, said Krishan Sachdev, MD, Carrier Midea India, Midea Group-India Region.

Anuj Poddar, Executive Director, Bajaj Electricals, said that the company has already implemented price hikes, in the range of 5-10 per cent, across various categories. It may need to undertake one more price hike by April if the supply situation does not improve, he added.

The impact of the coronavirus on the industry’s revenue will be perceptible from the last quarter of this financial year, though it will be more prominent in the first quarter of the next financial year, said Poddar.

Double whammy

The industry was already reeling under the impact of the overall economic slowdown beleaguering India, whilst it had also received a blow due to the Budget increasing the custom duty on certain products and components. Adding to this double whammy is the supply disruption due to the outbreak of coronavirus, said Poddar.

Some of the bigger factories have resumed operations only in the last three weeks, said Poddar. These large factories are dependent on smaller ones for raw materials and the like, and once they run out of such raw materials, it can pose a problem, he pointed out.

A Xiaomi spokesperson said in a statement from the third week of February that it has hiked the price of Redmi Note 8 (4GB+64GB) variant temporarily because of the impact.

Extended shutdown in China

“The extended shutdown in China is likely to have an impact on our supply chain and there is a risk of impact on the overall quantum of component supplies. While we are working to explore alternative supply channels for components and raw materials, the immediate impact is that the short supply might cause some negative pressure on prices of these components. This has led to the increase in the price of the product temporarily,” the statement said.

Changing major components such as compressors in ACs would result in loss of performance and reliability, which is not possible in a short time and therefore, it will be impossible to change sourcing to other countries for critical components in the short term, said Sachdev, as affirmed by others.

“On a short-term basis, the best way will be to maximise components from China and localise components as much as possible. On a longer term basis, it would be desirable to develop more local component sources and also evaluate other countries for sourcing components rather than the high dependence on China,” said Sachdev.

Published on March 12, 2020

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