Consumer durables and automobile costs are expected to see an uptick in the coming months due to the West Asia crisis.
Companies across sectors are facing difficulties procuring raw materials for products in India.
Consumer durable and automobile makers are witnessing an increase in logistic costs with shipping expenses surging upto 200 per cent.
“Due to security concerns in the Red Sea, many shipping companies opt to reroute their vessels around the Cape of Good Hope. This alternative path adds 30-50 per cent more travel time, resulting in substantial cost hikes. Container freight rates have jumped by 173 per cent, largely due to the longer routes and higher insurance premiums for ships operating in conflict zones. These rising logistics costs are anticipated to have a broad impact on industries that depend on international shipping, particularly in the consumer electronics and durable goods sectors,” said Rahul Garg, CEO & Founder of Moglix, to businessline.
With maximum raw material sourcing including screens, and semiconductors, consumer durables makers are likely to increase television prices soon.
Price rise
“Due to global tension, there’ll be a certain price rise in the raw material and freight cost. We can see the effect immediately, there will be a price rise in the coming months especially in small screen sizes like 32 inches and 43 inches,” said Avneet Singh Marwah, CEO of Super Plastronics Pvt Ltd (SPPL), an exclusive brand licensee of Thomson in India.
“While the exact percentage increase in consumer goods prices can vary, historical trends indicate that items like televisions could see a rise of 5-10 per cent, driven by these escalating transportation costs. Consequently, both raw material prices and consumer goods are likely to face inflationary pressures, with logistics being a key factor in this situation. Disruptions in the supply chains for essential raw materials, such as petroleum and other critical commodities, could further exacerbate price increases. This intricate scenario highlights the broader economic risks tied to geopolitical instability in crucial trade routes,” added Rahul.
Automobile makers are implementing different strategies to get vehicle products in the country.
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“The Mercedes-Benz E class which is the only car in the world to be a right-hand drive vehicle had to be sent to Germany to do crash testing, we sent it by air and got it back and then did the certification in India. It adds to cost but then we are balancing the timeline. The bigger impact is that the costs have gone up, and logistics costs have increased significantly. The new world is about navigating the challenges and finding solutions,” Santosh Iyer, Managing Director & CEO of Mercedes-Benz India, told businessline.
Further, automobile prices are expected to increase next year,”The increase in vehicle costs we see for next year, this festive period we will be able to navigate but next year, the cost is not only on the logistic side but also the exchange rate. How much of these costs can be absorbed is to be seen. We have not yet passed on to the cost, but at some point, mostly at the start of next year we will have to pass on the cost to the market,” added Santosh.