Consumer durable makers expect to see component shortage challenges to intensify next month due to the novel coronavirus outbreak, even as some Chinese component makers have resumed production though only at suboptimal levels. The first set of shipments from China is expected to begin reaching India only by mid-March, and hence some industry players may also look at air-lifting certain components later this month.
However, consumers may begin to see a price hike in the next few days across appliances and electronic products, which could further dampen the already muted consumer sentiment.
“The government has asked the industry association to submit a list of components that can be airlifted from China and we are in the process of collating this information,” said Kamal Nandi, President, Consumer Electronics and Appliances Manufacturers Association (CEAMA), and Business Head & Executive Vice-President, Godrej Appliances. “While Chinese companies have resumed production they are producing at only 50-60 per cent of their capacities and hence a delay in shipments is expected. Component shortages will be a challenge from April onwards.”
Factors behind price hike
A price hike in appliance is inevitable, he said, adding, it is “due to a host of factors including rise in component prices, hike in custom duties on certain components as well as the increase in freight costs.”
According to a report by HDFC, around 45 per cent of completely built units (CBUs) of consumer durables are imported from China. “Anecdotal evidence suggests that the companies typically maintain inventory for two-three months. Hence, the impact of the virus outbreak could be felt from March-April 2020. There could be an upward pressure on the prices, going forward,” it added.
“We are anticipating the first shipments by mid-March,” said Eric Braganza, President, Haier India. “We are not looking at air-lifting any components at the moment.”
Sources said airlifting can work only for certain components.
Air freight costs
Industry players are also concerned about a rise in air freight costs. Consumer durable companies are already witnessing rising input costs for raw materials and components.
Avneet Marwah, Director and CEO, SPPL, the brand licensee for Thomson and Kodak in India, said: “If you look at the TV panel cost alone, it has seen a spike in prices dramatically in the past few weeks. We are looking to go for a price hike by March 15. For smaller sizes LED TVs, the price hike could be 10-12 per cent and it would be higher for bigger sized TVs. Industry players are already witnessing shortages of components.”