Several large companies already took price hikes on air conditioners, washing machines, television sets, and other home appliances in January. However, companies said that higher input costs merit another round of hikes in the current quarter across a range of products. Price hikes will, however, be passed on in tranches, the companies said.
“The increase in commodity prices in Q4 did lead to an upward revision of prices for the white goods industry. We strive to use the best quality material focusing on durability and reduction in the total cost of ownership for our consumers…With a continued increase in input costs, the prices may go up by July, once the existing inventory is consumed,” said Manish Sharma, president and CEO, Panasonic India and South Asia.
Non-essential stores are facing temporary closures across markets. Moreover, consumer sentiment is low too, further weakening demand.
“As of now, some states are allowing opening of standalone non-essential stores. So, I hope to see some improvement in sales. But the sentiment is low, and people are not keen to step out. We are keeping a close watch on the situation but, we may see a loss of nearly 60-65% against sales projections during the ongoing quarter,” he said.
Prices of critical commodities such as copper, plastics, steel, and aluminum used in the white goods industry touched multi-year highs in the second half of the last financial year prompting price hikes earlier this year. Copper, steel, aluminum prices were up 44%, 38%, 22%, and respectively, brokerage Motilal Oswal Institutional Equities said in a report on the sector earlier this month. “This took a toll on companies’ gross margins in the third quarter and fourth quarter of FY21. All companies reported a margin decline of 2–5% in the second half of FY21,” it added.
Bajaj Electricals said it initiated another round of price increases in May that will reflect in the market once shops resume operations.
“We took a 6 to 8% price hike in January. And we’ve taken another 3 to 4% price hike now in May. The January one is fully in force, the May hike is not yet in force because markets have been in lockdown. While we’ve taken a price hike, the impact of that is yet to be seen in the market,” said Anuj Poddar, executive director, Bajaj Electricals Ltd.
Brokerage ICICI Securities said input cost increases will be passed on in tranches over the next three to four quarters. However, price hikes will have a negligible impact on the volumes in the medium-term, it said. White goods and durable companies have raised prices by 5-18% across products, it said.
However, it said that demand could come back once markets open up. “White goods and durables are (mostly) problem-solution categories and hence, consumers may defer purchases. Consumption loss appears low,” the report said.
But Poddar said inflationary pressures are expected to continue. “In terms of passing the hikes to consumers, there’s a lag effect to that. The highs have been very sharp in the commodities to pass all in one shot to consumers,” he added.
Companies have again lost out on sales in the peak summer season where demand for air conditioners and refrigerators is typically high. Others said that they are looking at cost-cutting measures before passing on hikes to end consumers.
“The impact of an increase in input cost and global supply chain shortages continue to be a challenge in the consumer durables space. While we had already taken cost-based price increases prior to the lockdown, we continue to look at internal efficiencies and cost take-outs to minimize the impact to the consumer and cushion the blow,” said Vishal Bhola, managing director-India, Whirlpool.
Bhola said that with large parts of the country being under lockdown since the beginning of the second quarter, the sales have definitely been impacted. “However, based on our experience from last year, we are confident that once the restrictions are lifted and consumers are given an opportunity to buy, the demand will rebound,” he added.
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