It may not be a sweet thought to share on Diwali, but a price increase in consumer durables is set to spoil the party which picked up a little late this festive season.
Homegrown Godrej Appliances, for instance, told FE that it plans to go in for a price increase on its televisions and refrigerators starting December 1, 2004, while Korean major Samsung India said it will announce something on the same lines as early as next week.
“The hike in fuel prices announced last week by the government has added fuel to the fire. Today, it has become unviable to sell appliances. We have looked at the impact and we have realised that there’s no other option but to increase prices,” Godrej Appliances executive vice president, marketing & sales, S Ghatak said.
According to Mr Ghatak, Godrej will hike prices of its refrigerators by Rs 200, and washing machines by Rs 250 per unit. The company will, however, not alter the pricing of its air conditioners for awhile.
What’s dampening the festive spirit is nothing else but inflationary pressures triggered by the recent increase in fuel prices leading to rising input costs.
“Cost of key materials such as steel and plastic has gone up by about 20% and it has now begun to impact us adversely,” Mr Ghatak said.
“We are feeling the impact as well. Prices will go up but right now we don’t want to spoil the festival sales,” Samsung India director Ravinder Zutshi said. According to him, the company has internally reviewed the impact of rising costs and plans to announce its decision next week. The company had, two months ago, revised prices of its entire product portfolio.
Another Korean manufacturer LG Electronics, when contacted, echoed the same views. “We have not analysed the impact so far... but we will break it down on per unit basis soon,” LG marketing head Salil Kapoor said.
Mr Kapoor, however, said that the possible price increase would be in the range of 5-7% for refrigerators, while it will be about 3-4% for televisions.
Chinese consumer durable major Haier, however, has a different perspective.
According to Haier Appliances India president and CEO TK Banerjee, “These are definitely hardships for consumer durable companies but it’s not prudent to take a price increase at a time when sales have just started looking buoyant”.
According to him, though there’s been a delayed response to this season’s Diwali sales, any price increase at this time will be disastrous.
“The industry has not grown substantially. At a time when there’s so much capacity in the market, nobody can take a chance by passing on the burden to consumers,” Mr Banerjee added.
Traditionally, sales for consumer durable companies peak during Diwali, which is the mainstay of the two-month festival season. In fact, companies are known to offer heavy price discounts and promotions during this period in order to perk up sales.
But Samsung does not agree that a price hike at this point will hit sales adversely. According to Mr Zutshi, a small increase will not change things drastically.