Here's why prices of consumer durables are unlikely to increase despite customs duty hike

Consumer durable makers expect a double-digit growth in sales this festive season despite a hike in customs duty as most of them have chosen to absorb the impact and not to pass it on to consumers, according to industry players.

Despite factors as depreciation of Indian rupee and increase in crude oil prices, manufacturers like Panasonic, Haier, Godrej Appliance and BSH Household Appliances are trying to keep alive the spirits of the festive season which accounts for around 25 per cent annual sales starting from Onam in the south and goes up to the Durga Puja and Diwali. This year, festive season sales in the south have been already washed away by floods in Kerala. Moreover, the increase in basic customs duty to 20 per cent on import of fully manufactured AC, refrigerator and washing machine along with the increase in customs duty on compressors has impacted the market sentiment.

"An increase in prices of compressors will lead to a definite price hike for refrigerators and ACs which will impact the market sentiment. But, for the upcoming festive season, we will be absorbing maximum costs in order to keep the festive spirits going. We will relook at revising the prices post this festive season," Panasonic India President and CEO Manish Sharma told PTI. Godrej Appliances Business Head & Executive Vice President Kamal Nandi said, "Since bulk of imports of components and finished goods for festive would have already happened at the industry level, we do not foresee an immediate jump in prices during festive. Even if there is some impact, manufacturers will try to hold back the price hikes to avoid dampening festive sentiments as much as possible."

The price hike will be implemented only post the procurement of the next lot of imports and the company will look at delaying the price hike so as to not dampen the festive sentiments, he added. The makers are also spending a substantial amount on marketing and branding during the one-and-a-half-month period. "Festive season should be good. We are quite optimistic about it even though the customs duty has gone up. We have done a lot of marketing to promote Haier in the festive season. Overall we have spent more than Rs 40 crore on marketing campaign during the festive season," said Haier India president Eric Braganza.

The Panasonic India CEO said their "marketing plans and targets" will go as per their plans and they have already stocked inventories to meet the demand during the festive season. BSH Household Appliances MD & CEO Gunjan Srivastava said, "We will continue to invest in our ongoing 360-degree marketing campaigns where digital platforms will continue to play an important role and also offer special finance schemes to our consumers. This festive season, we will be investing about 25 per cent higher than last year." Panasonic expects around 15 per cent growth this festive season primarily fueled by TVs, kitchen appliances, beauty care and wellness products such as air-purifiers and water purifiers.

"We foresee some pent-up demand to work in our favour. The certainty of post festive hike in prices for some categories may also help drive festive sales. We are working towards 25- 30 per cent growth in revenue this festive season," Sharma added. Consenting to them, Srivastava said, "We expect the festive season sales to be higher in comparison to last year." "BSH Household Appliances is expecting to grow by approximately 30 per cent compared to last year," he said, adding "We expect Tier 2 and 3 cities to grow at a faster rate than an all India average." Haier expects around 50 per cent growth in festive sales this fiscal.

Over the price hike, he said, "As far as Haier is concerned, Whatever stock we have on old rate, we would continue to sell on old rates, which would be last for 2-3 weeks ... On new clearances, we would increase the price."

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