New Delhi: Manufacturers of consumer electronics products and home appliances saw sluggish demand for the second year in a row, with only premium and top-end products driving sales in 2012.
The Rs.52,000 crore market grew at 5.6% between April and September, according to data from the Centre for Monitoring Indian Economy, a Mumbai-based economic think tank, after growing by 4% in the three months to 31 March. The corresponding growth numbers for 2011 wee 4.5% and 8%. The data for the October-December quarter is not yet available.
“What started as a slowdown in 2011 continued in 2012 and got worse. There was flat to declining growth across categories. Diwali was also a damp squib,” said Shantanu Dasgupta, vice-president (corporate affairs and strategy), Whirlpool of India Ltd.
Indeed, much like 2011, the so-called festival season that starts in September and ends in December, hasn’t seen the spike in demand it usually sees.
According to Manish Sharma, managing director (consumer product division), Panasonic India, the festive season did not bring any cheer. “The sector saw subdued demand during the year due to feeble consumer confidence.”
Frequent price hikes effected by the makers of consumer electronics and home appliances didn’t help. Dasgupta said companies could not help increasing the prices owing to costs of most base metals such as copper going up, but the hikes—most companies effected as many as three in the course of the year—left products costlier by between 15% and 20%. And persistent inflation and slowing economic growth have made customers wary of spending.
“People are very thoughtful in making a purchase decision these days unlike some years ago,” said Nilesh Gupta, managing partner, Vijay Sales, the country’s largest dealer of consumer electronics and appliances.
The one bright spot appears to have been premium products
“The mood was quite terrible this year and volumes didn't grow at all. It was only large screen LED television sets, priced Rs.60,000 onwards that saw some consumer traction. In home appliances, double-door refrigerators priced at an average of Rs.50,000 along with semi-automatic washing machines priced upward of Rs.15,000 saw demand from consumers,” said a consumer electronics executive on the industry who asked not to be identified because he is between jobs.
South Korean consumer durable firm Samsung Electronics Co. Ltd, the market leader, saw growth in sales of LED televisions, frost-free refrigerators and fully automatic washing machine categories, according to Mahesh Krishnan, vice-president (consumer electronics), Samsung India.
LG Electronics India Pvt. Ltd did not respond to Mint’s queries.
Still, the market for high-end products is a sliver of the larger market.
“Though LEDs did well for almost all brands such as LG, Samsung and Panasonic, you must remember that it is still a very niche category with a small base,” said Gupta of Vijay Sales.
The worst performing product category in 2012 was air conditioners, according to dealers as well as manufacturers. Valued at Rs.6,300 crore, the AC market was projected to grow at 14% between 2012-2017 as per data from Technopak Advisors Pvt. Ltd.
“The summer season wasn't very good and saw no demand from consumers,” said Gupta of Vijay Sales. Dasgupta of Whirpool said air conditioner sales declined by almost 10-15%.
“Gauging the bad situation last year, we made a conscious decision not to push AC’s this year. We only carried forward our inventory from last year.”
Interestingly, Panasonic did well with its affordable Cube ACs . “We realised that there is a vacuum in the market with windows ACs available at Rs.12,000 and split ACs at Rs.20,000 plus. With our localization efforts, we launched a new category of ACs between the split and window range, priced affordably for consumers to get a split AC at the price of a window AC,” said Sharma.
Indeed, the industry can do better by innovatively approaching costs, said the executive mentioned in the first instance.
And 2013 doesn’t look good, he added. “If the same conditions persist the industry will barely grow 10%.”