Consumer durable majors are pushing sales of home appliances like ACs and refrigerators to make up for the drop in colour television (CTV) sales. CTV sales have tanked by about 40% in recent weeks owing to expectations of a downward price revision post-budget. The industry is holding on to an average 4-8 weeks of stock. Needless to say, this has begun putting pressure on prices.
Leading industry officials have said that investments in the stock market and real estate may have possibly contributed to a tight liquidity position in the market. Additionally, several new competitors, both in high and low-end segments, have entered the market, leading to fierce competition and pressure on prices.
D Shivkumar, ED & VP, Philips India said the industry is looking seriously at inventory correction and production cuts to protect bottom lines. “CTV sales have been dropping consistently. At the moment, nobody is able to come up with any clear reasons for the same,” he said.
Colour TVs account for approximately 70% of total sales in the consumer durable industry. Companies observing 'stock obsolescence'(SO) standards -due to price erosion in the market - like LG, Samsung and Philips have begun tightening production schedules, pruning production and imports by 22-25% since the last quarter of '05. As per SO standards, any stock remaining unsold for more than 90 days goes into the loss book, forcing companies to cut prices before that.
Manufacturers and dealers have also stepped up discounts and promotional offers to clear their existing inventory levels. Currently, about 60% of the domestic demand is met by local manufacturing, imports account for the rest.
According to Gulu Mirchandani, CMD of Mirc Electronics, a clear trend is likely to emerge only after Mr Chidambaram presents his Budget. “It's been a difficult market and as we near the budget, volumes have dropped further,” he said.