Companies that make mobile phones, televisions and refrigerators have started cutting production targets till July by 10% on slowing demand due to repeated price increases, multiple industry executives said. Almost all mobile phone makers have altered their production plans, while consumer electronic companies are currently finalising plans depending on their inventory level, they said.
“Mobile phone sales are down by roughly 30% in the year-to-date period, hence the industry is cutting down on production by 10% than what was initially planned,” said Pradeep Jain, managing director of Jaina Group, which manufactures smartphones for several top brands besides retailing its own Karbonn brand. “Companies are focused on liquidating stock,” he said.
The managing directors of two leading electronics contract manufacturers, requesting anonymity, said their mobile phone clients and even lighting products customers were taking similar steps.
Prices of Mobile, Appliances up 9-15% in a Year
“Brands have become cautious and the production cut is 8-15% from the original plan,” one of the MDs said.
Mobile phone sales started slowing down from January-March quarter, with researcher IDC India estimating that shipments declined by 5% over the same period last year and prices hitting a lifetime high. The researcher said the maximum impact is in the Rs 10,000-30,000 price segment which constitutes the the bulk of the market.
IDC India research director Navkendar Singh said with demand softening, brands are expected to recalibrate their production plans.
- Demand outlook for mobile phones, appliances down for next 2-3 months
- Cos say impact bigger in entry-to-mid level products and rural markets
- They fear a large section of consumers may cut down on discretionary spending
- Prices of electronic products have gone up by 9-15% in last one year
- Cos may postpone or soften further price hikes if demand fails to recover
“The supply situation is getting better. But unless there is a significant demand uptick in the latter half of the year, the overall smartphone market in India will see growth challenges this calendar year,” he said.
As per estimates, prices of mobile phones, televisions, refrigerators, washing machines have gone up by 9-15% in the last one year due to increase in component, input and logistic prices.
This is at a time when the Russia-Ukraine war and extended Covid lockdown in China are impacting global supply chains. Prices of agri-commodities, fuel and groceries are on the rise and bank interest rate too is hardening which, executives said, together have started to impact discretionary spending of consumers.
While the government has taken some steps to tame inflation, industry says consumers will continue to remain cautious in the near term.
chairman Arvind Uppal, in the company’s recent earnings statement, said the normalisation of post-Covid demand along with high inflation across the board has hurt the durable industry. “Growth vs profitability needs to be balanced and recent fiscal actions by the government should help soften the impact,” he said. Uppal, however, added the “turbulent period is not over” for the industry.
Avneet Singh Marwah, chief executive of SPPL, which manufactures Kodak, Thomson and Blaupunkt brands, said apart from demand softening, the lockdown in China has also disrupted production plans which may continue for 1-2 months before brands again scale up to meet the festival demand. Thewix