Prices of consumer durables such as televisions sets, air conditioners, refrigerators and microwaves could rise in the next one month in India as a partial clamp down of Chinese factories amid the ongoing novel coronavirus epidemic cuts short supply of components and finished goods required for such products, ratings agency CRISIL warned in a report on Thursday.
In its report assessing the impact of the deadly novel coronavirus on various industries that rely on imports from China, and also exports to the country, CRISIL said that the impact of the disease is negative for the consumer durables sector due to its “high dependency on imports from China”.
India imports 45% completely built units of consumer durables from China. In addition, India also imports bulk of consumer durable components from China, CRISIL said in its impact report, underlining an imminent supply shortage for large consumer electronics companies especially ahead of the summer season in north India. Players have already stocked inventory, so impact will be felt only towards the end of the fourth quarter of FY20. Product prices could rise next month, the report added.
CRISIL estimates that export-import trade between India and China (including Hong Kong) was $115 billion in calendar year 2019.
“Some factories in Hubei province have reopened post Chinese New Year but these units are yet to scale up to their full potential due to labour shortage. Shipping and air transport operations to many Chinese cities remain suspended from and to India, or are operating with low frequency. That’s delaying shipments between the countries. Consumer durables, electronics, solar panels would be most hit, as these heavily depend on imports from China, with no immediate alternatives available,” CRISIL said in its note.
Impact of the disruption caused in the Chinese supply chain will become visible in the market by March this year, CRISIL said, adding that companies typically work on a two month inventory period that is set to come to an end soon. “Inventory days for consumer durables sector is typically around two months. Hence, with the virus outbreak, the impact will begin to be visible in March 2020–marked by inventory rundown, leading to negative impact by end of fourth quarter this fiscal, and a possible increase in product prices,” CRISIL said.
India imports parts such as open cell TV panels from China, along with compressors, and motors for other households electronics.
Television prices could go up by 10% to 15% said brand owners. “The situation is very bad right now. If you take consumer electronics, specially if I talk of large appliances and TV–you will see a steep price increase of 10% in the month of March and it may further rise in the month of April,” said Avneet Singh Marwah, CEO, SSPL that is an exclusive brand licensee of Thomson televisions in India. One of the core reasons for increase is that open cell panel prices have gone up by 15-20%, he added. Marwah said the company has delayed launch of four of its new models in India anticipating a shortage of components coming in from China.
Indian manufacturers are currently ill-equipped for large scale manufacturing, CRISIL said, implying that a shortfall of imports from China cannot be met by local vendors in the country. “India currently doesn’t possess large-scale manufacturing capability in this sector. Thus, even if China loses out on consumer durables exports, India may not be able to capitalise on the opportunity,” the report added.
Marwah expects shipments to be delayed by another month as factories that supply to the company are yet to fully resume production. The company has stocks for another month and a half.
Mint had earlier reported that smartphone prices are set to rise in India as early as over the next fortnight as retailers and stockists run out of stocks following China’s shutdown of a large number of factories due to the coronavirus outbreak. China is a key supplier of smartphones to the world’s largest mobile phone companies. CRISIL said that India’s high dependency on imports with some critical components being produced with China is expected to have significant impact mobile phone imports.―Livemint