Exclusive: Depreciating Rupee likely to boost localisation of components for consumer durables

Since the pandemic began in early 2020, it has been a challenging time for the consumer durable and electronics industry. From component shortages to increasing freight charges, the industry has been struggling to meet the demand without hurting the consumer sentiment on the price front.

Now, the fall of the rupee against the dollar, which crossed Rs 80 for the first time and later recovered to Rs 79.88 is only adding to the pressure on the input cost. Acknowledging the pressure that the weakening of the Indian currency can have on the consumer durable and electronics industry, the manufacturers are increasingly focusing on boosting local component sourcing and manufacturing in India.

Kamal Nandi, Business Head and Executive Vice President at Godrej Appliances, part of Godrej & Boyce told Business Today “Wherever possible, we are trying to localise these raw materials, however, the local manufacturer is still dependent on imports of key raw materials, hence we cannot eliminate the impact of rupee depreciation completely. Localisation can help reduce the impact of the customs duty.”

Godrej is not alone as Haier Appliances India too believes that sourcing components locally can help in easing the price fluctuation. Satish NS, President, Haier Appliances India said, “We are constantly striving to minimise the impact of these factors on our consumers. With more than 90 per cent of Haier products locally manufactured at our two industrial parks in Ranjangaon, Pune, and Greater Noida, we are hopeful that the ‘Made in India’ products will have a limited effect on their pricing.”

The industry has already witnessed a 7-10 per cent increase in commodity prices at the industry level in addition to the earlier 25-28 per cent since December 2020. In comparison, the industry has taken only up to a 5 per cent price hike in phases between January and June totalling up to 17-18 per cent since December 2020, keeping the consumer demand in mind.  However, now since there are positive changes observed in the commodity prices, the industry is not rushing into steep price increases.

Price hike may impact festive sentiment

Nandi estimates the second half of the year to be better than the first half with the softening of the commodity prices and reduction in inflationary trend.  “We anticipate that consumers who are postponing purchases now will come forward during festive. A lot will depend on how the economy behaves, inflation and employment levels but expectations are cautiously positive around improvement in discretionary spending. We have planned raw materials accordingly. Inventory production is being planned to cover festive demand and excess production will be planned post-August, basis Onam trends.”

However, if the Rupee continues to depreciate further, there can be another round of price hikes of about 2-3 per cent in the coming months. “The impact of import cost increase and commodity price reduction, along with current material inventory levels, may result in slight price adjustment in the next few months,” adds Satish NS of Haier. If this price hike happens, it is likely to dampen the festive season spirit where customers are usually eyeing festive offers and discounts.

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