Consumer durable industry is betting on a strong summer season in 2022 after losing two peak summer seasons of business to Covid waves and the resultant restrictions or lockdowns. “If all goes well, around 35-40 per cent of total annual sales will come from this summer season, with growth more on value than volume terms,” said Eric Braganza, President, Consumer Electronics and Appliances Manufacturers Association (CEAMA). Maintaining that the growth during the summer season will be 25-30 per cent over 2021 figures, he said that the industry is expecting to clock a growth of 5-7 per cent over 2019 levels.

However, there could be an impact on sales due to consistent price hike in overall consumer durable and electronic products on the back of rising raw material cost, oil prices, freight costs, packaging costs, etc. Tanya Krishna from FinancialExpress.com spoke to Eric Braganza about the business outlook of the industry, price hike expectations, PLI scheme and the challenges going forward.

Edited Excerpts from the interview…

How do you see the consumer durables industry performing currently? Where do you see it going in the coming months?

The industry is slated for definite growth this summer season; however, looking at the next four months, it’s going to be a good performance since the last two years had a bad summer season and there was almost no sales of summer products like refrigerators, air conditioners, etc. These products are expected to be doing extremely well in H1, that is, from January to June in comparison to the last two years, basically because we are getting a good season which we did not have in the last two years.

Generally, TVs being a non seasonal product sells throughout the year but mostly around festivities like Onam, around Durga Puja and Diwali, washing machines work better during the second half of the year than the first half, and refrigerators, air conditioners and deep freezers are products are at their peak during the summer season.

Read More: Consumer durable companies expect strong summer season this year; feature-rich products to drive sales

Has there been an inclination towards more energy-efficient products?

The prices of energy-efficient products obviously are higher with five star label products as compared to a three star or a two star rated appliance. However, I feel these products will show better traction or increase in sales in a better and quicker way if there is some incentive given to the consumer for using or buying more energy-efficient products.

In terms of GST also, more energy-efficient products go under the 28 per cent slab instead of 18 per cent slab and it obviously increases the price. Similar with TV also where all good models are in 28 per cent slab and few are in 18 per cent. If the government rationalises the GST around 18 per cent and for entry level products at 12 per cent, it will act as a quick booster for the industry and will subsequently stimulate growth, demand and will lead to growth of the industry.

While there is a directive by 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 get into the threshold of 35-40 per cent of the overall sales for the companies, it does not make sense for them to increase the star labeling. Because if you go on increasing the energy efficiency and the quantum of sales is low, it will not help in any way.

How will the government’s PLI scheme help the consumer durable segment?

Our prime objective is to work closely with the government to grow the domestic market, build economies of scale, increase export competitiveness and make India a key manufacturing hub. We will need to look at all product categories carefully and see how we can develop a more robust component ecosystem to reduce dependence on imports and save valuable foreign exchange.

The PLI scheme will help India strengthen the Make-in-India initiative and the components ecosystem. While it is not something which will help in the short term, the PLI scheme will prove to be beneficial for the industry because it will give the country an opportunity to source components which we import from other countries currently. Having those raw materials available in the domestic market will lower the cost that adds up to the cost of the component, such as freight cost, import duty, foreign exchange rate, etc.

With the increase in production capacity and PLI scheme in place, we will be able to compete with other countries and soon enough will create an export hub in India. However, we cannot become a manufacturing hub unless the domestic consumption improves and the government needs to support it in any way possible. Further, Indians should be able to offer competitive prices in line with the rest of the world.

The consumer durables industry is poised to almost double in the next 5-6 years and hence the sector has the potential to become the engine of economic growth and create substantial job opportunities.

What is the quantum of price hike consumers are looking at in the segment; and in what all categories or product range?

The industry is under pressure due to high raw material costs and a surge in other inflationary pressures such as in freight costs. Further with the ongoing Russia Ukraine crisis, crop prices are further increasing, oil prices have gone up which will increase freight cost, steel, copper, aluminium and plastic prices are increasing as well. While all these price hikes will not impact on an immediate basis because the production is already done for inventory till March- April, we can expect further price hikes around June-July if these external price hikes sustain. Whatever price hike happened before the Russia-Ukraine war escalated, it happened around Diwali till January and February in the range of 7-10 per cent.