The sharp rise in price of commodities, such as copper, steel, aluminium and ABS plastic, will lead to an increase in the prices of consumer durable products in the range of 6 to 20 per cent ― depending on the appliance ― before the end of the month or in January, said company officials.
The increase in commodity prices has also worsened the supply issues the sector has been facing in the last couple of months, leading to a further shortage of products.
The recent import restrictions, coupled with the freight issues and delays in port clearances for some imported products, have augmented the supply issue. On an average, depending on the category, anywhere between 25-70 per cent of the components of appliances are imported.
“The entire infrastructure is reeling under a lot of pressure. Manufacturers are also resorting to brief shutdowns for conducting their routine annual maintenance, which were postponed due to the pandemic, further impacting the supply side. Ocean and air freights are higher than before and container movements are not smooth,” Kamal Nandi, Business Head and Executive Vice President, Godrej Appliances, told BusinessLine .
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The rising commodity cost by 20-25 per cent can be attributed to the lag in restoration of supply, which is putting upward pressure on the overall prices of finished goods as well, Nandi added.
Manish Sharma, President & CEO, Panasonic India, said that he expects the rise in commodity prices to push up the prices of the company’s products by 6-7 per cent by as early as January. This may go up to 10-11 per cent by April, he added.
“Just when we thought we would normalise the supplies and get everything back on track, the rise in commodity prices has again put a spoke in the wheel. Some commodities are not available, even at an increased price, because of their shortage in the marketplace,” said Anuj Poddar, Executive Director, Bajaj Electricals. From January onwards, Poddar expects most of the companies in the sector to resort to price increases. This could be in the range of 6-15 per cent for Bajaj Electricals’ products, while larger appliances could raise prices by 10-20 per cent, he said.
On whether this can have a bearing on the demand for consumer durable products, Poddar said, “It may impact demand, but we don’t have an option because it’s not a cost that we can absorb.”
Blue Star has already increased the prices of its air conditioners by 4-5 per cent from December 1 onwards. “You can expect that the current price hike will be good at least till March, and I am hoping that the commodity prices will soften from February,” said B Thiagarajan, MD, Blue Star. Among the commodities, the price of ABS plastic, in particular, has increased by 2.5-3 times, he pointed out. Though such fluctuations in commodity prices happen every year, it has been very steep this year, he noted.
Apart from the increase in commodity prices, Thiagarajan said that the increase in shipping container charges ― it has increased by four times compared to last year and by six times compared to December 2018 ― and the lack of availability of these shipping containers have contributed to the price increase of ACs. “The question is, we are saying Atmanirbhar Bharat, but the supply chain is completely choked as we indigenise,” he said.
Avneet Singh Marwah, CEO, Super Plastronics Pvt Ltd, the brand licensee of Kodak and Thomson TVs in India, said that panel prices have been increasing over the past few months, aggravating the supply challenges faced by the television sector. He expects the prices of TVs to further increase due to this factor. “Since Diwali, there has been a month-on-month increase in the price of TVs. This has already started affecting the demand for smaller size TVs,” he explained.