With the festival season around the corner, the Government’s move to hike basic customs duty on imported refrigerators, washing machines (less than 10 kg) and air conditioners, has thrown the consumer durables sector into a bit of a tizzy.

While some companies have decided to increase prices on imported products immediately, others are evaluating pricing strategies. Experts believe the strategy will be closely linked to a company’s dependence on imports.

According to Edelweiss Investment Research, imports account for nearly 20 per cent of the Indian refrigerator and washing machine segments. “The companies with high dependency on imported finished products would be negatively impacted in the near-term whereas companies with low dependency on imported finished product will gain competitive advantage over peers,” the report added.

Vijay Babu, Business Head, Refrigerators at LG India, said, “Our entire line-up is manufactured in India except for minimal high-end consumer durables. We will be increasing the price with immediate effect on imported CBUs (Completely built unit) of refrigerators and washing machines. These should not impact consumer sentiment as these segments are not price-sensitive.”

Over the years, leading brands have ramped up domestic manufacturing of washing machines and refrigerators.

Eric Braganza, President, Haier Appliances India said that the company is evaluating the impact and its pricing strategy. “Some players might take a price hike immediately so prices stabilise by the festival season, others mayhold off till after the season,” he said. It will also depend on the imported inventories of the companies.

CARE Ratings noted, that “the timing of the hike will have a major impact on the durables industry with the festival season just around the corner. Also, the companies may not be able to pass on the price rise on account of muted demand in the domestic market post the price drop on washing machines and refrigerators during June-August 2018 due to GST-led rate corrections.”

Manish Sharma, President and CEO, Panasonic India, said, “We are evaluating in a manner which won’t impact our end consumer.”

However, the AC industry is plagued with bigger challenges. Not only has the government hiked import duty on air-conditioners, but also on the compressors for which the companies rely heavily on imports. Rupee devaluation along with import duty hike and 28 per cent GST tax slab have now emerged key challenges for the AC industry. Kamal Nandi, EVP and Business Head of Godrej Appliances, said that increase will not have an impact on the consumer sentiment for categories such as refrigerators and washing machines.

“But, the increase in the customs duty will have an adverse impact on the AC segment, as the capacity built up at present is not adequate to meet the current demand of the market. Some key components like compressors for ACs are also largely imported. The hike in import duties will lead to a significant rise in the AC prices therefore, more so in the forthcoming summer,” he added.

Rakesh Dugar, CMD, Mitashi, said, “We are doing our best to contain the impact and not pass on the hike, at least not in October.”

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