With the central government pushing for local manufacturing and sourcing of components, the home appliances industry in India is set to become self-reliant in the next five years, says Kamal Nandi, business head of Godrej Appliances and president of Consumer Electronics and Appliances Manufacturers Association (CEAMA).
India currently does not have a component ecosystem for home appliance makers to alternately source from. Industry bodies such as CEAMA, along with the government is working towards developing that ecosystem, Nandi said.
“The phased manufacturing program and PLI scheme will help manufacturing activities in our sector in a big way, not just with finished goods, but components as well. A component ecosystem will be developed over the next five years. With finished goods, we are already 90-95 percent self-reliant. In components, we will be 70-80 percent self-reliant in five years,” Nandi said.
This comes on the heels of the government hiking customs duty on AC and refrigerator compressors by 2.5 percent during the union budget. However, this hike in duty in unlikely to increase costs for appliance makers in the country.
“The component of compressors to total bill of materials not large. The increase of 2.5 percent duty won’t be huge and will be absorbed by most brands. The larger challenge for industry will be to implement cost hike due to commodities,” Nandi said.
The home appliances industry is already staring at a slow quarter as the festive demand tapers off, and input cost pressures rise. As demand picked up post the lockdown last year, the industry saw growth in excess of 15 percent from August to December 2020.
However, Nandi said price hikes will impact demand this quarter, which has seen a drop since January 2021 due to rising commodity prices, which have in turn resulted in a 10-12 percent hike in prices of appliances such as air conditioners, washing machines and refrigerators.
Copper, zinc, aluminium and steel prices have risen steeply over the past few months, which has forced several industries dependent on these raw materials to pass on some on the costs to consumers in the form of price hikes. An increase in ocean freight charges too, due to a shortage in containers, has added to the issue.
Nandi, however said that the shortage is short-lived. He expects the shortage to ease off over next 1-2 quarters, which will then bring prices down.
On the demand front, Nandi expects demand to pick up during summer, and a 15 percent growth rate to return to the home appliances industry by late March or early April.
