The spiral of price rises has been set in motion following the Union Budget, announced earlier this month. After cigarettes, which went up by nine to 12 per cent, it is now the turn of home appliances to get dearer.
Godrej and Whirlpool have increased product prices by about Rs 200-300 per unit, following the two per cent rise in excise. For Godrej's air conditioners, the increase is even steeper at Rs 500 per unit. In all, the two companies have passed on nearly the entire excise rise to consumers.
While LG and Samsung have said they are still considering price increases, trade sources say that LG may revise prices from April 1. Samsung is likely to do so a little later, while Videocon will take up product prices after April 15.
Most companies admit, with allied cost pressures having grown, there is no way the pass-on to consumers can be contained.
George Menezes, chief operating officer, Godrej Appliances, says, "In the last twelve months, input cost inflation has been nearly 10 per cent. The rupee has been volatile, having depreciated 20 per cent between August 2011 to January 2012. It did stabilise in between, but has been volatile since February this year. Given that the total quantum of price rises taken in the last year is just about seven to eight per cent, it is impossible to hold back in such an environment."
Says Shantanu Das Gupta, vice-president, corporate affairs & strategy, Whirlpool, India, "As such price increases have been measured to be hitting margins, there is no option but to raise prices."
In the last nine months of the current financial year, consumer durable companies have seen their margins fall by over 100-200 basis points.
The price rises which have been taken - about four so far - have been mostly in appliances. Most companies have been hesitant to raise prices in categories such as television sets -especially, flat panel TVs - owing to the growth it has seen. On an average, flat panel TVs have grown at over 30-40 per cent per annum, for the last few years. It is currently a four-million-unit market, slated to cross over five million by the end of this year.
Most consumer electronic makers have benefiited in the last two years from low panel prices, owing to rapid upgradation of technology. On an average, panel prices have dropped by 10-15 per cent in the last one year.
Manufacturers were, in turn, able to pass this to consumers, which reflected in the deep discounts offered on flat panel TVs. On an average, an entry-level LCD TV costs Rs 14,000-15,000. LED TVs are a little steeper at Rs 16,000-17,000 for entry-level models.
But prices are likely to fall further with full exemption of customs duty on LCD and LED panels, which was announced during the current Budget. "It is a big relief," says Anirudh Dhoot, director, Videocon Industries.
That is because the bulk of the cost in flat panel TVs is on account of the panel. With full exemption of customs duty, manufacturers are most likely to pass this on to fuel growth.