Several large companies have already taken price hikes on air conditioners, washing machines, televisions and other household appliances in January. However, the companies said rising input costs deserved a new round of hikes in the current quarter for a line of products. The price increases will be passed on in installments, however, the companies said.
“The increase in commodity prices in the fourth quarter led to an upward revision of prices in the white goods industry. We strive to use the best quality material with an emphasis on sustainability and lowering the total cost of ownership for our consumers … With continuously increasing input costs, prices could increase by July, once existing inventory is consumed, ”said Manish Sharma, President and CEO, Panasonic India and South Asia.
Non-essential stores are facing temporary closures in all markets. In addition, consumer confidence is also low, which further weakens demand.
“As of now, some states allow the opening of stand-alone non-essential stores. So I hope to see an improvement in sales. But the feeling is weak and people don’t want to go out. We are monitoring the situation closely, but we could see a loss of almost 60-65% from the sales forecast in the current quarter, ”he said.
The prices of essential commodities such as copper, plastics, steel, and aluminum used in the white goods industry hit multi-year highs in the second half of the past fiscal year, resulting in resulted in price hikes earlier this year. Prices for copper, steel and aluminum rose 44%, 38%, 22%, and respectively, Motilal brokerage Oswal Institutional Equities said in an industry report earlier this month. “This had a negative impact on business gross margins in the third quarter and fourth quarter of FY21. All companies reported a 2-5% margin decline in the second half of FY21, ”he added.
Bajaj Electricals said it launched another round of price increases in May that will be reflected in the market once the stores resume operations.
“We made a price increase of 6 to 8% in January. And we’ve taken another 3-4% price hike now in May. The January one is fully in effect, the May hike is not yet in effect because the markets are stuck. Although we have made a price hike, the impact of this remains to be seen in the market, ”said Anuj Poddar, Executive Director of Bajaj Electricals Ltd.
Brokerage ICICI Securities said increases in input costs will be passed through in installments over the next three to four quarters. However, the price increases will have a negligible impact on volumes in the medium term, he said. White goods and sustainable businesses have increased prices 5-18% for all products, he said.
However, he said demand could return once the markets open. “White goods and durable goods are (for the most part) problem-solving categories and, as a result, consumers may postpone their purchases. The loss in consumption appears to be small, ”the report said.
But Poddar said inflationary pressures are expected to continue. “In terms of passing the increases on to consumers, there is a lag effect to that. The peaks have been very sharp in raw materials to pass all at once to consumers, ”he added.
Businesses again lost sales during the peak summer season, when demand for air conditioners and refrigerators is generally high. Others said they were considering cost-cutting measures before passing the increases on to end consumers.
“The impact of rising input costs and global supply chain shortages continues to be a challenge in the consumer durables space. Although we have already taken cost-based price increases prior to foreclosure, we continue to seek internal efficiencies and cost reductions to minimize the impact on the consumer and cushion the blow, ”said Vishal Bhola, Director general – India, Whirlpool.
Bhola said that as large parts of the country have been stranded since the start of the second quarter, sales have definitely been affected. “However, based on our experience over the past year, we are confident that once the restrictions are lifted and consumers have the opportunity to buy, demand will rebound,” he added.
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