Consumer electronics and home appliances companies are about to further raise prices by 5-7 per cent as early as this quarter itself. This is due to rising prices of commodities, global freight and raw materials shortages over the past year.
Like most consumer goods, air conditioners, televisions, water heaters among other consumer durables and home appliances are set to get costlier the very first quarter of the new year, with yet another round of price hikes in the offing. The companies in the category are going for another round of price increase, even while realising this may dampen the sales, as consumer confidence is yet to recover to the pre-pandemic level. Prices of commodities under the category will go up in the range of 5-7 per cent from January to March, according to the Consumer Electronics and Appliances Manufacturers Association (CEAMA).
“The price hike has been due for some time now. The industry postponed price increases due to the festive season. However, we expect prices to be hiked around 5-7 per cent this quarter due to a rise in commodity inflation,” said Eric Braganza, President, CEAMA, in a communication last month. The quantum of the price hike, as he maintained, would vary with few of the companies already having raised the prices.
Hitachi, Haier, Orient, Godrej, Bajaj, others to raise prices by this much
Orient Electric Ltd will raise prices by 4-7 per cent this quarter across the product portfolio; and Hitachi will raise the prices by 3-4 per cent, according to both companies’ spokesperson quoted in a recent PTI report. Haier Appliances will increase prices by 3-5 per cent in the refrigerator, washing machines, and air conditioner categories, a company executive told Financial Express Online requesting anonymity. Meanwhile, few others in the likes of Panasonic and LG have already implemented price hikes.
“At Godrej Appliances, we have taken three price hikes last year totaling to 10-12 per cent across our product categories. Currently, the price gap between the raw material price increase in comparison to the finished product price rise is to the tune of 4-8 per cent across categories- AC being the highest. We are closely watching the market and will take up price rise at an opportune moment in the coming months,” Kamal Nandi, Business Head and Executive Vice President, Godrej Appliances, told Financial Express Online.
Bajaj Electricals had increased the prices by 12-17 per cent during January-September 2021. “Post September 2021, we have not taken any hike. Given the costs that have continued to stay high or even go further, we do need a further price hike which will be between 4 to 5 per cent to catch up on that. This will happen sometime during the current quarter,” Anuj Poddar, Executive Director, Bajaj Electricals Ltd, told Financial Express Online.
What’s causing the price rise?
Surge in the cost of raw materials and commodities such as plastics, steel and copper, etc are leading the consumer durable makers to pass on the impact to customers. Companies in the category are frequently raising prices, as high input and logistics costs, and supply disruptions since the end of 2020 are eroding margins.
“Rising prices of commodities, global freight and raw materials shortages over the past year have led to significant price hikes in the white goods sector. Commodity costs went up by about 20 per cent in 2021, but the price increase of finished products until last year was limited to 12-13 per cent. There was a gap of about 7-8 per cent between commodity prices and the appliances prices even after the hikes taken in the industry,” said Kamal Nandi of Godrej.
Imported inflation bites
Further, the anti-dumping duties imposed on aluminum and refrigerants may cause firms in the category to increase prices over and above the actual commodity cost increase, said a spokesperson from Johnson Controls-Hitachi Air Conditioning India.
“The bite of inflation is palpable in every category. The consumer electronics and durables category is no exception. One of the prime causes is the fact that fuel prices pinch today more than yesterday. Transportation costs have cascaded. Expect this to be a trend for sure. Fuel price hikes are part of what we call ‘imported inflation’. This imported inflation bites,” business and brand-strategy expert Harish Bijoor told Financial Express Online.
Fingers crossed in hope for consumer demand
Meanwhile, consumer electronics companies hope for consumer demand to go up and prices of raw materials to fall, which might help them bring prices down in the next quarter. “We have been trying to optimize the product costing but there’s only so much you can do. The second lever is the other operating costs, etc, which we have been optimizing, and in Q3, we reduced the operating costs down to 14 per cent on a year-on-year basis. We will try to drive that optimization in the current quarter too. But ultimately, it will have to be either the commodity cost of the price that will have to come in to offset or correct the margins,” said Anuj Poddar of Bajaj Electricals. Doonited