Rupee slide to push up prices of consumer durables, electronics

Home appliance makers took up prices by 2-3% in two rounds in last two months to deal with rupee depreciation

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The rupee's slide on Friday to Rs 62 a dollar is expected to push up prices of consumer durable and electronic goods by three to 5% as the festive season nears.

This will be the third price hike for quite a few companies in three months as they struggle to cope with a volatile rupee, which has shed over 10 % of its value since May.

Home appliance makers such as Godrej, for instance, took up prices by two to three % in two rounds in the last two months to deal with the rupee depreciation.

The current fall, however, says George Menezes, chief operating officer, Godrej Appliances, is forcing the Mumbai-based firm to revise prices upwards again by another three %. "By the end of this month, the new prices of our products should kick in," he says.

B Thiagarajan, president of Blue Star, an airconditioning & refrigeration products maker, says his company would increase product prices by at least three % in the next one week. “We had factored in the rupee at Rs 60 a dollar. It is now at Rs 62. We are left with no option but to increase prices," he says.

Suresh Kumar Bandi, divisional deputy managing director, Panasonic, also said that his company's home appliance portfolio would see a revision in price by about three to five % in the next few weeks.

Korean chaebols LG and Samsung, meanwhile, were guarded in their response to price hikes. "We had taken a price increase of about two to three % this June in refrigerators, washing machines and air conditioners," Rajeev Jain, business group head, home appliances, LG Electronics said.

"We are yet to take a decision on a new round of price hikes," he added. Deepak Jasodia, business group head, home electronics, LG Electronics, said that two rounds of price hikes in June and July respectively in flat panel TVs was effected by the company. "Whether we want to go in for a third round with the festive season nearing is a decision we are yet to take," he says.

A Samsung spokesperson also echoed similar views saying the company had increased prices of its mobile phones and other electronic gadgets by two to 3% last month. "For now we are watching the situation closely and have not taken a decision regarding a further price hike," the spokesperson said.

Japanese consumer electronics giant Panasonic also is taking a similar step. “We will pass on the hike onto consumers only if the rupee depreciates further and falls below the Rs 62 to a USD mark. The price hike will be across all categories,” said Manish Sharma, MD, Panasonic India.

Besides, the company has decided to increase focus on the B2B (business-to-business) products to keep up profit margins considering that the cost of import has been increasing over the past few months. To maintain volume growth, Sharma said, Panasonic is increasing local production, especially India-specific products.

“The B2B segment can help expand our margins and lead to better profitability. The costs are lower as there are no ad budgets and distribution expenses. We are putting more efforts on our enterprise product line targeted at the healthcare, security and education space. To drive cost efficiencies in the consumer space, we have increased our production capacity at our plant in Jhajjar, Haryana,” he added.

But, Shantanu Dasgupta, VP (Corporate Affairs & Strategy), Whirlpool of India, said that the reality is that the supply base in India has not developed in line with evolution of the appliances industry.

“While local sourcing or manufacturing makes common sense in a situation where the rupee has depreciated so severely, business realities are such that imports cannot be completely eliminated. That said, Indigenising sourcing and manufacturing wherever possible, and increasing exports, are on the agenda of mitigating actions for the challenge caused by the sharp depreciation of the rupee,” he added.

This nervousness to take up prices especially in consumer electronics is because categories such as flat panel TVs, mobile phones, laptops, tablets etc are pushed heavily during the festive season.

At a time when consumers are deferring purchases, manufacturers are in no mood to dampen spirits further with a new round of price hikes. On an average, companies derive almost 25 to 30 % of their sales from the festive period stretching from Onam in Kerala to Dussehra/Diwali.