In 2009, consumer durable makers were a happy lot. After the finance minister announced excise and customs duty reductions, prices of almost all kinds of televisions (especially flat panels) fell. Coming as it did after an unresolved panel shortage globally due to insufficient supply of glass substrates, the fiscal push helped panel TV sales significantly. Growth was also seen in premium products across each segment - LCD TVs, split ACs, fully automatic washing machines, microwave ovens etc.
Then, home appliance categories like washing machines and refrigerators also showed a better-than-average growth of over 15%. Two rounds of excise duty cuts - first in December 2008 and then again in February last year - brought down the effective rate to 8% for most durables. So, except for a slow March quarter, sales picked up quarter on quarter through 2009, with Diwali sales growing by as much as 35-50% over sales during Diwali 2008.
Companies such as LG Electronics, Samsung India and Whirlpool reported strong sales across most product categories. Samsung’s refrigerator sales grew nearly 80%. In 2009, overall industry sales of LCD televisions grew by 93-94%; Japanese major Panasonic has targeted 100% sales growth to $945 million for FF10.
So robust was the growth in durables sales that as a sub-index of manufacturing in the country’s IIP, consumer durables logged 37.3% increase in November 2009. This all-round robust performance also obviously led to margin growth for most durables manufacturers. Overall consumer durables industry grew 11% to Rs 30,000 crore from a mere 8% growth logged in 2008.
But this happy scenario may not last long, especially if the Budget this time around recommends even partial withdrawal of the stimulus measures.
Not only will excise benefits not accrue to manufacturers, the continued spike in input prices has also already begun to squeeze margins. For example, copper prices are up 125%, steel by over 7% and resin by 22% in the last 12 months. Some of the top durables makers aver that even if the government maintains status quo on excise duties this time, then too price revisions are bound to happen.
Yet another noticeable trend last year was the enhanced focused on energy efficient ‘Star’ ratings. Now that for some products such as air conditioners and frost free refrigerators energy efficiency rating has been made mandatory, more and more companies are expected to invest in manufacturing and selling “green” products.
Yes, this technology does raise the purchase price somewhat but it also promises to significantly lower electricity bills.
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