Durables companies hit as A/C sales dip, input costs rise in 2011

NEW DELHI: While consumers enjoyed a pleasant summer in 2011, it was bad weather for the durables industry as a slump in air-conditioner sales compounded their woes in a year in which the sector had to struggle to cope with high input costs and a weakened rupee.

According to the Consumer Electronics and Appliances Manufacturers Association (CEAMA), the estimated Rs 35,000 crore Indian consumer durables market, which has giants like LG, Sony, Videocon, Samsung and Panasonic, did not grow as expected, with air-conditioners being the biggest spoilsport.

"There was minimum growth. We expected that the consumer durables market will grow at around 15 per cent this year, but it grew by only 8-9 per cent," CEAMA President and Videocon Director Anirudh Dhoot told PTI.

He said because of "high interest rates and trouble in the economy, consumer sentiments were down, though they picked up later, especially during the festive season".

Expressing similar sentiments, the President and CEO of Samsung India Electronics, Jung Soo Shin, said the year has been a challenging one because of the foreign exchange rate situation and high commodity prices, though the firm continued to bring in new and innovative products during the period.

"For the overall industry, it is little bit tough and challenging. The air-conditioner business was a quiet one because of the weather conditions, but home appliances and televisions have shown a good growth. There was a fast transition from CRTVs to flat panels," Shin said.

In terms of value, the air-conditioner segment is estimated to be worth around Rs 7,500 crore, accounting for about 21.4 per cent of the overall consumer durables business in India.

At present, the air-conditioner market is currently estimated to be around 3.4 million units in volume terms, while the television segment stands at 17.5 million units, of which LCDs contribute around 4.5 million units.

To offset high input costs and the depreciating rupee, leading companies -- including LG, Samsung and Videocon -- hiked prices by up to 6 per cent across their products range during the year. However, the firms said the hikes were not enough and they are looking at a further hike in the near future.

"Nobody expected that the US dollar will rise in such a way and it is one of the biggest factors in raising our cost," LG Electronics India Business Head (Home Appliances) Rajeev Jain had said.

Appreciation of the US dollar against the rupee has put an additional burden on the company, as 40 per cent of its home appliances are imported from different plants located in China, Korea and Thailand, he added.