Increasing crude oil prices to make ACs, fridge & microwave costlier soon
Increasing crude oil prices to make ACs, fridge & microwave costlier soon
A decline in rupee value, crude oil prices hike and rates of key raw material steel and copper hardening up may lead to 2-5% increase in prices of air-conditioners, refrigerators, washing machines and microwave ovens, three senior industry executives familiar with the matter said.
A Rs 400 to over Rs 1,500 hike in prices for premium models will be added to new products which will hit the market. The companies said while demand has been rather subdued, they are left with no other option since the input cost pressure and rupee depreciation have been pinching them since March, leaving little scope for any absorption.
Kamal Nandi, Godrej Appliances business head said, “Prices will increase in phases from June to cushion customer sentiments and as fresh supplies hit the market. The industry had held back the price rise for the past two months due to existing component stock which was sourced at lower prices.”
Godrej will raise prices by 2-3%, while India’s largest air-conditioner maker Voltas has just increased prices by around 3%. Whirlpool India’s managing director Sunil D’Souza said the firm too will be increasing prices once the industry does, but is yet to decide on the extent.
Industry executives said even the Korean duo LG and Samsung have indicated to traders that prices may go up by up to 5%.
Voltas MD Pradeep Bakshi said the company has tried to minimise the impact of this price increase by extending promotional offers.
Managing director Panasonic India, Manish Sharma said cost pressure on account of rising commodity prices are high and it’s on the upper side of limits to hold prices. “Any further depreciation of the rupee or increase in input cost will force the price increase,” he said.
The industry had benchmarked the rupee at Rs 66 against the dollar in its existing pricing strategy, but it’s currently hovering over Rs 67, having depreciated by 7% vis-à-vis the dollar since January. Industry executives said steel prices have gone up by 7-8%, so have prices of a copper condenser which are imported largely from China. However, prices of some chemicals such as foaming agent have dropped, thereby providing some cushion.
There were diverse responses from the retailers. East’s leading retailer Great Eastern Appliances director Pulkit Baid said any price increase, on the backdrop of a bad summer sales due to unseasonal rainfall, will further deter growth unless brands engage aggressively in demand creation to subdue the effect.
However, Mumbai-based retailer Vijay Sales managing partner Nilesh Gupta said the price increase is not likely to impact much demand since over 70% of sales now takes place on consumer financing. “Sales have largely become price inelastic due to EMI purchases,” he explained.
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