Consumer appliances firms scale back production as covid dents demand

Large home appliances makers are temporarily slashing production factoring a dip in consumer demand as the country continues to deal with a surge in covid cases and subsequent lockdowns in states significantly impacting retail of non-essential goods.

Companies such as Usha International, Panasonic, Havells etc have partially restricted capacity at their plants. Some have done so citing employee safety.

Shashi Arora, president and chief executive of Lloyd, Havells India’s consumer durables business, said April is the peak season for air conditioners for which the company starts building inventory from December. However, this year, the sales were brisk only up until the first two weeks of April.

Consequently, the company has cut back production in its air conditioner plant at Ghiloth—near Neemrana, Rajasthan, about 90kms from Delhi.

“Although we used to start bringing down production from May, we have already scaled back even more this year because of the prevailing situation and dip in demand. In short, we had three shifts at plant and we have reduced it to a single shift,” he said.

Lloyd makes air conditioners and started selling refrigerators six months ago. It also makes semi-automatic washing machines through vendor partners.

The company had expected a big build-up for its refrigerator business which is now marred by a slowdown. “Refrigerators are made by contract manufacturers and we have told them to scale back production for us by 25%. In March no one could have predicted this downslide and we had big plans for our refrigerator range,” said Arora.

Last week, local arm of Japanese electronics company Panasonic paused manufacturing at its plant in Jhajjhar, Haryana, where it manufacturers consumer durables and welding machines. The decision was taken keeping employee safety in mind. Its electrical products plants that make plugs, switches, etc are functioning with low capacity, the company said.

Panasonic, that makes ACs and refrigerators, among other things, is reviewing the situation on a weekly basis and will take a call on continuing production depending on the external environment.

Manish Sharma, president and CEO, India and South Asia, Panasonic said that with a few states levying partial lockdowns, the company anticipates some disruptions in the supply chain across regions.

“However, with the kind of growth we have witnessed in the last few months, also expecting the pent-up demand to be back once the markets open again, we are positive that the next quarter will witness revival, though we may see a loss of 35-40% against projections during the ongoing quarter,” he said.

India’s covid cases surged in April prompting several states to go under curfews. Maharashtra, Karnataka and Delhi have been under lockdown. Odisha announced a 14-day lockdown starting 05 May. Most states have directed non-essential stores to shut, large markets and malls remain closed too affecting retail sales and consumer mobility.

Retailers and makers of household appliances had started seeing meaningful recovery in March and companies were preparing for a strong summer season.

Rohit Mathur, president, electric fans, pumps and water heaters at Usha International, said the market situation is “extremely volatile” for most consumer durables companies. The company has already scaled back production by 30-35% for fans due to lack of demand. The room cooler category is seeing a steeper cut. All its plants are, however, operational at lower capacity.

“There is definitely a dip in demand as consumers have been hit hard by covid 19 and because there are varying degrees on lockdowns in different states,” said Mathur.

Mathur said Usha’s vendors have also been hit—with the company facing shortage in raw material supplies. “We have vendors all over northern India in places like Uttarakhand and Himachal Pradesh. There’s a shortage of raw materials and getting all the component from them is a challenge too. The complete chain is affected because mobility is restricted in various states,” he said.

In the first quarter of this year while fans will see dip of 30-35% in sales, room coolers will be hit harder, he said.

Mathur said consumers are not buying as households are dealing with medical emergencies. This makes it hard to forecast any uptick in consumer demand, he said.

With consumer prioritizing personal health amid covid spread, big ticket discretionary items could take a beating. “This year’s tragedy is very different from last year. Online sales have slipped too. Consumer sentiment has been hurt very badly because he has been physically hit,” he said. Livemint

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