India's television industry is in the middle of a slump. Sales are falling as consumers are putting off purchase decisions of discretionary goods. For manufacturers, the average selling prices are under pressure too, as many new brands have started competing in a flat market.
The TV industry was growing at over 20 per cent for many years. However, in the last calendar year, volumes inched up just 3 per cent while the value growth remained flat.
"The demand isn't growing. TV is at 15 million units annually. Many years ago, it was at 12 million," Manish Sharma, CEO - India and South Asia, Panasonic, told Business Today during an interaction. "Fact of the matter is that for almost three quarters, TVs are facing a tough time. Last calendar year was flat and this year is going very tough. The first quarter has seen a de-growth - the segment would have de-grown 15-20 per cent versus the same period last year for the industry," he added.
TVs typically see a boost before major sporting events. However, this year turned out different. The Cricket World Cup didn't tickle the market much.
"Events like the World Cup result in a sudden increase in sales. It didn't happen this time. The second thing is finance. About 75 per cent of sales happen through consumer finance. With NBFCs under pressure, even small ticket items like LED TVs (priced between Rs 12000-35000), are not being financed as earlier," said Sunil Vachani, Executive Chairman of Dixon, a company that manufactures products in the consumer durables, lighting and mobile phones industries.
TVs are probably the most important category when it comes to electronics appliances. There are about 45,000 retailers who deal in such goods and nearly all of them retail TVs. About 75 per cent of them retail refrigerators, followed by washing machines and air conditioners.
Interestingly, there is no slump in the sales of white goods yet - cooling products have done well because India experienced a harsh summer. Products such as air conditioners became a necessity rather than a discretionary item. Nevertheless, Manish Sharma of Panasonic noted that TVs as a category is facing multiple headwinds.
"TV is fighting a qualitative battle with the mobile phone. The entertainment appetite is getting fulfilled through a mobile device. So people sit on the edge, saying why should they buy a TV," he said. A second headwind is illegitimate imports from China. "Approximately 2.5 million of 15 million units are coming in through routes that can be termed as grey. They are under invoiced and import duties evaded. This is a large number and puts pressure on the organised players who have made investments in the country," Sharma said.
So what could turn around the fortunes of the industry in this crucial quarter before Diwali? A lower rate of GST to begin with, Sharma said. "TV is a commodity. 32 inches and below is at 18 per cent. It should ideally be at 12 per cent. The large screen can be at 18 per cent. Then there could be an explosion of demand," he hoped. A second issue is a five per cent duty on the open cell, a component of the TV panel. "The five per cent has an impact of three per cent on the bill of materials (BOMs) cost. If it's zero, the benefit could be passed on to consumers," he noted. A third help would be if India's agencies keep a look-out for grey imports. The point is that if the TV segment doesn't bounce back, it could drag the entire electronics appliances space along with it.