CEAMA chairman Eric Braganza said about 35-40 percent of annual sales for consumer durables and electronics companies this year will come from the summer season, with growth based more on value than volume.
The consumer durables sector is aiming for a strong summer season in 2022 after losing two peak summer seasons due to Covid waves and consequent restrictions or lockdowns. “If all goes well, about 35-40 percent of total annual sales will come this summer season, with growth more in value than volume,” said Eric Braganza, President, Consumer Electronics and Appliances Manufacturers Association (CEAMA). He maintained that growth over the summer season will be 25-30 percent from 2021 figures, and said the industry expects 5-7 percent growth from 2019 levels.
However, there could be an impact on sales due to a consistent increase in the price of consumer durables and electronic products due to rising raw material costs, oil prices, freight costs, packaging costs, etc. Tanya Krishna of FinancialExpress.com spoke to Eric Braganza about the business outlook of the industry, expectations of price increases, the PLI scheme and the challenges ahead.
Edited excerpts from the interview…
How do you see the consumer durables sector currently performing? Where do you see it going in the coming months?
The industry is slated for significant growth this summer season; however, if we look at the next four months, it will be a good performance as the past two years have been a bad summer season and there was almost no sales of summer products such as refrigerators, air conditioners, etc. These products are expected to perform extremely well in H1, that is, from January to June compared to the last two years, mainly because we get a good season that we didn’t have in the last two years.
In general, TVs, which are a non-seasonal product, are sold all year round, but usually around festivities such as Onam, around Durga Puja and Diwali, washing machines work better in the second half of the year than the first half, and refrigerators , air conditioners and freezers are products are at their peak during the summer season.
Read more: Consumer sustainable companies expect a strong summer season this year; feature-rich products to boost sales
Is there a trend towards more energy efficient products?
The prices of energy efficient products are clearly higher with five star label products compared to a three star or two star appliance. However, I believe that these products will gain traction or increase their sales in a better and faster way if there is an incentive for consumers to use or buy more energy efficient products.
In terms of GST, more energy efficient products also go below 28 percent plate instead of 18 percent plate and it obviously increases the price. The same goes for TV, also where all good models are in 28 percent plate and few in 18 percent. If the government rationalizes GST at around 18 percent and entry-level products at 12 percent, it will be a quick boost for the industry and then drive growth, demand and lead to industry growth.
While there is a guideline from the Bureau of Energy Efficiency (BEE) on energy-efficient products, the government needs to understand that every time you add a star to the product, the manufacturer’s cost for the product increases. So, unless and until these star-rated products hit the 35-40 percent threshold of the companies’ total revenue, there’s no point for them to increase star labeling. Because if you continue to increase energy efficiency and the number of sales is low, it will not help in any way.
How will the government’s PLI scheme help the sustainable consumer segment?
Our main goal is to work closely with the government to grow the domestic market, build economies of scale, increase export competitiveness and make India a major manufacturing center. We will have to look carefully at all product categories and see how we can develop a more robust ecosystem of components to reduce dependence on imports and save valuable foreign exchange.
The PLI scheme will help India strengthen the Make-in-India initiative and its components ecosystem. While not something that will help in the short term, the PLI scheme will prove beneficial to the industry as it will give the country an opportunity to buy components that we are currently importing from other countries. If those raw materials are available in the domestic market, the costs that add up to the cost of the part, such as freight charges, import duties, exchange rates, etc.
With the increase in production capacity and PLI schedule, we can compete with other countries and will soon create an export hub in India. However, we cannot become a manufacturing hub unless domestic consumption improves and the government must support it in every way possible. Furthermore, Indians should be able to offer competitive prices comparable to the rest of the world.
The consumer durables sector is poised to nearly double in the next 5-6 years and therefore has the potential to become the engine of economic growth and create substantial jobs.
What is the magnitude of the price increase that consumers are looking at in the segment; and in which all categories or assortment?
The industry is under pressure from high raw material costs and an increase in other inflationary pressures, such as freight costs. Furthermore, with the ongoing Russia-Ukraine crisis, crop prices are rising further, oil prices have risen, which will increase freight costs, as well as rising prices of steel, copper, aluminum and plastic. While all of these price increases won’t have an immediate impact as production is already happening for inventories through March-April, we can expect further price increases around June-July if these external price increases continue. Whatever price hike happened before the Russia-Ukraine war escalated, it happened around Diwali through January and February in the 7-10 percent range.
This post Sustainable consumer electronics companies will generate approximately 40 percent of annual sales by the summer of 2022 was original published at “https://www.financialexpress.com/industry/consumer-durables-electronics-companies-will-generate-around-40-per-cent-of-annual-sales-in-2022-summer/2462592/”