Rupee fall to hit festive sales of cars, durables
With the rupee falling consistently against the dollar — it touched ~71.56 on Tuesday — consumer durables and automobile companies are staring at a difficult festive season this year.
These firms are likely to face trouble because prices of raw materials (such as metals and plastic) and components are benchmarked against the dollar. This means these companies will have to increases the prices of their products.
LG, Haier, and Godrej Appliances have hiked prices by 3-5 per cent this month. Panasonic India is expected to increase product prices by 2-3 per cent soon.
Car companies are no exception. Maruti Suzuki, the country’s largest carmaker, has increased prices across its models by up to ~6,100 in August. Toyota Kirloskar has hiked prices 2-3 per cent across its portfolio this month.
Price hikes are likely to dampen demand, especially during the festive season when most of these companies clock the highest sales.
Sellers of durables said they expect sales to fall by 5-10 per cent. There could also be further price hikes if the rupee continues to its free fall.
“The rupee depreciation has come at the wrong time,”
said Eric Braganza, president, Haier Appliances India. “We were expecting a good festive season as the goods and services tax (GST) rates were cut 10 per cent in July. The GST benefit was promptly passed on to consumers. But with the price hike now, this will adversely affect demand during the festive season.”
Kamal Nandi, business head and executive vice-president, Godrej Appliances, said, “The industry has been growing in single digits for some time. Following the GST rate cut, we were hoping the tide would turn. But now consumers may hold back purchases.”
The increase in prices will put volumes under pressure, claim carmakers. Almost 2530 per cent of a car company’s sales happen during the festive season (August-October). For durables companies, 40 per cent of their sales are achieved during the period.
Shekar Viswanathan, vicechairman, Toyota Kirloskar, said, “I don’t think the rupee is going to be stable in the long run. We have been preparing for a continued depreciation of the rupee at 6 per cent per annum against the dollar. The price hike (of 2-3 per cent) will blunt the edge, to a certain extent, of the impact of the falling rupee. But beyond a point, we cannot increase prices as it will put volumes under pressure.”
TVs, too, have become or will soon become more expensive. Some television manufacturers are going to hike prices in the middle of this month. Others, such as Super Plastronics, which has the licence for Thompson and Kodak TV, have already hiked prices.
Avneet Singh Marwah, chief executive officer (CEO), Super Plastronics, said his company has gone for two rounds of price hikes in August and September. Their TVs are now about 12 per cent more expensive.
They were compelled to increase prices as the fall in the rupee increased the cost of flat panels.
Manish Sharma, president and CEO, Panasonic India, said, “The rupee’s continuous slide will put pressure on the overall input costs, affecting prices of white goods. We are trying to keep the price impact, so that sales are not affected.”