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Consumer durables fetch less

Consumer durables fetch less

Author | Source: Business Standard | Tuesday, Aug 09,2005 8:09 AM

Consumer durables fetch less

6% decline in realisation despite 48% Q1 sales growth.

The consumer durables industry has seen a decent 48.23 per cent increase in sales volumes in the April-June quarter but the value realisation has dipped by 6.4 per cent to Rs 2,948.77 crore from Rs 3,150.31 crore, recorded in the same period in the previous year.

This, according to an ORG study, is due to a slowdown in refrigerator and colour television sales—the two cash cows. The increase in sales volumes to 106,610 units from 71,923 units in the same period last year was triggered by sales microwave ovens (91 per cent growth) and washing machines (8.9 per cent growth).

“It is a transition phase. While urban consumers are still waiting to shift from an ordinary TV set to a plasma TV, people in rural India are deliberating on whether to shift from direct-cool to frost-free refrigerators. It will take a while before the consumer durables market takes off,” said an industry analyst.

Salil Kapoor, marketing head of LG Electronics, attributed the decline in value realisation to the introduction of value-added tax (VAT). “We will closely watch the festive season to assess whether there is any other factor responsible for the decline.”

The first quarter trend was discouraging for colour TV manufacturers, even from the perspective of sales volumes. The number of units sold declined by 5.3 per cent compared with 17.3 per cent growth in the first quarter ended June 2004. The unit sales of refrigerators declined 2.1 per cent compared with a growth of 4.5 per cent in the same period in the previous year.

The washing machines segment showed a slower growth rate of 8.9 per cent compared with 15.3 per cent. “The washing machine, as a category, is not growing particularly well over the last few years. A major factor for the lack of demand could be the fact that Indian households even today prefer to hand wash clothes than use a washing machine. Even if there is a washing machine at home, it is not that frequently used. The rural market appears virgin,” said a senior executive with Whirlpool India.

The microwave oven segment, which accounts for 70 per cent of the unit sales in the consumer durables industry, has bucked the overall trend.

Consumer durables companies sold 74,713 (39,130) microwave ovens, 16,595 (17,521) colour TV sets, 11,849 (12,101) refrigerators and 3,453 (3,171) washing machines during the quarter ended June 2005.

The microwave oven turnover grew 65.6 per cent compared with a unit sales growth rate of 90.9 per cent, indicating more units were sold at cheaper rates.

The microwave oven market has, in fact, seen a decline in value. “Two years back, a microwave, which was costing Rs 7,000 a unit, is today priced at Rs 5,000 or less,” said source in the industry.

The turnover of the colour TV segment declined 14.1 per cent to Rs 1470.68 crore and that of refrigerators, 1.3 per cent to Rs 1124.91 crore. The turnover of the washing machine segment has increased by 11.2 per cent to Rs 291.31 crore.

Due to stiff competition, companies had to cut prices of consumer durable products like washing machines and refrigerators, which had led to a decline in the turnover for the companies, said Rajiv Jain, product group head, washing machines, LG.

“De-growth in the direct-cool refrigerators is more compared with the growth in frost-free ones. When the sales of the two categories are combined, it results into an overall decline in growth,” the Whirlpool executive said.

LG Electronics tops the list of companies improving their market share in three major white goods segments, accounting for one in every three white goods sold in the market during the quarter ended June 2005.

LG leads the market with 29.06 per cent share in terms of value of goods sold, up from 25.68 per cent in the corresponding quarter last year. LG’s share in the refrigerator segment rose from 25.6 per cent to 29.4 per cent. In the washing machine segment, its share went up from 31.9 per cent to 35.1 per cent and in colour TVS, it improved from 24.2 per cent to 26.7 per cent.

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