Consumer electronic items may stay cheaper during the Covid scare period

Pratim Ranjan Bose Kolkata | Updated on April 20, 2020 Published on April 19, 2020

The global semiconductor industry could suffer a decline of 0.9 per cent this year due to the Covid-19 impact, says Gartner   -  REUTERS

If you are planning to buy consumer electronics items, the next few months following the lockdown when companies will have pre-Covid inventory, are perhaps the best time. Because Covid might change many things in business, with price implication.

The exact implications are difficult to estimate at this stage as the impact is manifold and has both short and long-term perspectives on national as well as international scale. Also, with Covid-19 still on the rampage, the whole situation is evolving.

Costly imports

However, certain impacts are visible. From ₹72.17 on March 1, the value of dollar is up by 6.5 per cent to ₹76.85 on April 16. This was primarily due to fall in crude prices (dollar moves in the opposite direction of crude), following a rift between OPEC and Russia on production cut.

Though the conflict now stands resolved, the future movement of oil prices will depend on global economic recovery. The latest oil futures point to long and deep recession. Considering that consumer electronics has substantial import content, a strong dollar will act as a cost push.

The global shipping logistics chain is also disrupted by Covid. Shipping is the backbone of world trade. Every month, approximately 1,00,000 crew are rotated across the world. It is not necessary or feasible that shipping companies will deploy crew in lines connecting their home country, meaning someone from India may join duty from St Petersburg.

The worldwide lockdown and air-travel ban disrupted the staffing model and ships are now making do with hands stuck on board, according to an article published by Transport Topics. The impact may be felt on availability of ships beginning next month.

Recession, the fragility of global finance and its impact on the shipping companies, and the operational restrictions – like quarantine of crew if the voyage from select countries is less than 14 days – may add to the concerns about logistics costs.

Compliance costs

Kamal Nandi, President of Consumer Electronics and Appliances Manufacturers Association (CEAMA), and Business Head and executive vice-president of Godrej Appliances, feels that operational restrictions may push up costs at the factory-end too.

The government issued a set of workplace restrictions to ensure social distancing. There are reasons to believe that such restrictions will be a part of the operational manual henceforth.

“Compliance costs will increase post-Covid,” Nandi said. CEEMA will asses future cost implications on the industry and other issues after the government announces stimulus 2.0.

Existing stock at old price

According to Nandi, in tune with the global trend, India may witness greater focus on domestic component manufacturing. Some work has already been done in this direction in the past as Godrej is manufacturing some key components in India.

Leaving long-term possibilities aside in the immediate run, manufacturing based on fresh procurement will bear a “new price tag,” Nandi said.

The opportunity for consumers is maximum in the cooling segment such as AC and fridge. The lockdown came at a time when the entire retail channel was fully stocked up for summer sales.

According to Krishan Sachdev MD of Carrier Midea India, makers of room ACs, the summer sale lasting between mid-March and Mid-June account for 60 per cent of his annual sales. Now that half of the window is lost in lockdown, his trade partners are fully stocked up.

For him the discussion on new production strategies can wait. The immediate concern is to sell what is already produced. It is not yet known if the retail outlets can operate normally after May 3, if they do not the company has to depend on e-commerce that has so far contributed 10 per cent sales.

The most crucial factor is consumer interest. Will it be intact? He is pinning hopes on metrological prediction of a warmer summer. There is precedence of one hot month contributing 50 per cent of annual sales, he said.

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Published on April 19, 2020
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