Prices of consumer gadgets set to shoot up as rupee slides

Last Updated: Fri, Jun 14, 2013 04:24 hrs

Consumers would soon have to shell out more to buy mobile phones, TV sets, cameras, laptops and other consumer electronic goods, with the sharp depreciation in the value of the rupee - which had hit a new record low on Tuesday - and experts estimating it to fall to Rs 60 in foreseeable future.

Indian Cellular Association (ICA) President Pankaj Mahendru says prices across the board would go up by seven-eight per cent. "Margins in this business are never more than five per cent and that has been wiped out by the rupee's fall. Companies generally have stock for only two-three weeks. So, prices will go up very soon; there is no other choice," he adds.

Indian manufacturers, which depend entirely on completely-built units (CBU), say they will be the worst-hit. Lava Mobile Director S N Rai says: "We will have to increase prices by at least 10 per cent after a week or a fortnight, as our current pricing is based on the rupee's value of 55.5 a dollar. Our margins are very low. Unlike multinational firms like Apple or Samsung, which have larger mark-ups and more ability to absorb an increase, we don't have that option."

He adds at least one leading US firm has a material cost bill of around $188 but sells mobiles in India at $500. For such companies, the impact will be limited. However, there also are foreign mobile firms in India the value addition of which is not more than 12 per cent. So, they will be impacted.

"We have raised our prices by two-three per cent. But if the rupee continues to weaken, our prices might increase three-four per cent next month. The depreciation is affecting the demand as well. A seven-eight per cent depreciation in four weeks will definitely impact the demand of imported products," says BenQ India country head Rajeev Singh.

Consumer electronics companies are divided on their immediate response to the rupee's depreciation, though all seem to agree that prices might have to be raised. B Thiagarajan, president of Blue Star, an airconditioning & refrigeration products maker, says his company would increase prices of its products by 2-7.5 per cent in the days to come. "We had factored in the rupee at 54 a dollar. It is now at 58. This is simply untenable. We have to raise prices," he says.

"If the trend continues for a longer period, there is no option but to increase prices across categories. We can manage comfortably even if the rupee is at 56 or 57 a dollar. We have yet to take a decision and will wait and watch till the market responds. We'll also look at the competition before taking a call," says Sunil Nayyar, head (sales), Sony India.

Kamal Nandi, executive vice-president (marketing & sales), Godrej Appliances, says his company will pass on the entire impact of the rupee's slide to consumers. "I cannot quantify the price hike, but we are targeting June 15 as the effective date of an increase," he says.

Camera maker Canon India is more cautious. Its executive vice-president Alok Bharadwaj says: "We cannot afford to increase prices right now, as the market is down and managing profitability is becoming tough. However, the rupee's eight per cent devaluation in a month will impact our top line. If the trend persists over the next two months, we will have to take a call on a price hike."

"At present, there is a rolling inventory for about 30 days in the market. After this one-month window, if the rupee doesn't recover, the prices are likely to be raised," says Panasonic India MD Manish Sharma.

LG Electronics India is also looking at an increase in prices of its high-end products, if the trend continues. "If the rupee stays at the same level or further depreciates, it will definitely have an impact on pricing," says LG Electronics India MD Soon Kwon. The price increase, according to LG executives, could be more than 10 per cent, depending on products.

Mobile phones: 7-10%
Blue Star products: 2-7.5%
Sony India products: No change if the rupee stays at 56-57 a dollar
Canon India products: In watch mode; no change for two months
Panasonic products: A price hike after a month if the rupee does not stabilise (has an inventory of 30 days)

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