Customs duty hikes in Budget to hit demand in 2018, says LG India MD

The market in India is big enough and many large global players are already present here. But manufacturing is still confined to assembly, says Kim Ki Wan

Korean electronics major LG is present in India for over 20 years, but 2017 was “specially challenging”. While the Customs duty hikes on key components like flat TV panel by 15 per cent since December is intended to encourage local manufacturing, Kim Ki Wan, managing director, LG Electronics India, tells Arnab Dutta that it would increase the cost of TV by 8-10 per cent and hamper sales. Edited excerpts:

How does back-to-back Customs duty hikes on components impact the market?

I don’t clearly understand. What is the government’s takeaway from increases in import duty on key components? There are examples of protecting local manufacturing by raising duties. But, in this case, there is no local manufacturing here. And, bringing in foreign investment takes a long time, as manufacturing such key components require investments worth billions of dollars.

Without providing a period of transition, these steps would increase the cost of production significantly, which will have to be passed on and consumers will end up paying more. We would try to absorb additional costs but that has a limit. While higher duties may result in increased tax revenue for the government, purchasing power of Indian consumers will go down. That will negatively impact demand in 2018.

Are you planning to bring global partners, who manufacture components, here?

The market in India is big enough and many large global players are already present here. But manufacturing is still confined to assembly. We are in serious discussions with an Indian company for panel manufacturing in India. But since that would require large investments, government’s support through schemes like M-SIPS (modified special incentive package scheme) would be crucial. Currently, only three countries — Japan, Korea and China — manufacture panels.

Is growing interests of Chinese companies in India’s electronics market a threat?

Chinese companies are aggressively investing here and more companies may join the existing ones. But political tension between the two nations is a concern. However, Chinese companies should not be a threat for us as our products are much superior in quality. We need to communicate that effectively.

Your handsets business has decimated in the past few years. Do you see any scope for revival?

We are humbly learning from the market, so that we don’t repeat the same mistakes. Internal project on studying consumer behaviour will be finished this year. Thus, right now, I don’t know what our strategy and target would be. But we will firmly come back in the market and a revival is possible.

How does LG plan to improve growth in 2018, after a tough 2017?

Our aim is to offer technologically advanced products that improves the lives of consumers. And sales will itself grow. LG smart TVs run on cloud-based operating system, unlike others. After converting our air conditioner portfolio into inverter, we will convert categories like refrigerator and washing machines. This will help sales in the rural market, where electricity cost is a concern. Fans are used in every household in India. To revolutionise experience, we are coming up with smart fans.