As Omicron Looms, Supply Is Not The Biggest Worry For Appliance Makers

Consumer electronics and appliance makers are beefing up the supply chain amid growing fears over the Omicron variant of the coronavirus. But the problem lies elsewhere.Industry executives BloombergQuint spoke with said there are reasons to be concerned about demand during the prolonged pandemic. Consumers have either satiated their appetite for new stuff or are still uneasy about big-budget purchases. To make that worse, inflation has begun to hurt.“Most companies would have taken into consideration the persistent supply-chain problems while planning for January and February [but] the fear is that demand could suffer as price increases are inevitable,” Eric Braganza, president at Haier Appliances India Pvt., who has also taken over as president of Consumer Electronics and Appliances Manufacturers Association, told BloombergQuint. The “hope of a rebound” is increasingly challenged by the double whammy of soaring prices and the Omicron threat.Prices of refrigerators, televisions, washing machines, air-conditioners and other durables, he said, are expected to go up by 5-6% between January and March as companies look to offset inflationary pressures on margins. “Some have already raised prices by 2-3% in December, others will hike in the subsequent months.”.Omicron cases in India account for less than 0.04% of the total variants detected. But fears that the new strain could fuel another outbreak and complicate efforts to reopen the economy are prompting people to spend less and save more. A disruption in supply chain may also escalate product prices.The Rs 50,000-crore domestic appliance industry has already lost two peak seasons—April-June—because of the two Covid-19 waves. First, unavailability of products due to intermittent lockdowns, labour and logistics bottlenecks hurt manufacturers. Then, as mobility normalised, pent-up demand morphed into a full-blown crisis featuring a shortage of core components such as semiconductor chips. Imminent delays in shipping and higher freight costs aggravated the woes.“Even today, there has been no improvement in the overall scenario,” said Avneet Singh Marwah, chief executive officer at Super Plastronics Pvt., which sells Kodak, Thomson, Blaupunkt and Westinghouse electronic brands. “We are currently buying 35% more [raw materials] than usual amid an already stressed situation. Supplies of chip sets are low and hence lesser volumes are being shipped. Logistics rates have also not budged an inch. All these despite a subdued demand scenario.”Neeraj Bahl, managing director and CEO at BSH Home Appliances Ltd., the maker of Bosch and Siemens products, expects delays and shortages to impact its business over the next few months.Tata Group’s electronic store chain Croma is stocking 15-20% more inventory as supplies have been erratic, CEO Avijit Mitra said. “Depending on stocks coming in, we will have to review the situation.”.Nirmal Bang Institutional Equities’ interaction with dealers and distributors indicated that there is still fear of a possible third Covid wave due to Omicron, which is resulting in lower stocking. “Small businesses continue to bleed as large retailers and e-commerce players gain market share over general trade dealers due to better pricing and availability of financing options,” the brokerage said in a note. “Online sales have affected traditional channels post the pandemic and unorganised players have become active in the markets again.”Saurabh Baishakhia, president (appliances) at Usha International Ltd., said, “We don’t know yet how severe the Omicron wave will turn out to be and how the governments will react, but we are taking measures to ensure business doesn’t suffer.”The company, he said, is working on 60-day availability for local components. The lead time for imported components is about 90-150 days. “Unless there is a strict lockdown, supply should not be affected but high product prices could lead to demand drops.”The company has taken a 15% price hike so far this fiscal against the raw material inflation of 20-25%, Baishakhia said..India’s factory output, classified by end-use of goods, in October pointed toward a tepid economic recovery. Consumer durables output was 6.1% lower than a year ago. It fell 0.7% over the preceding month.“Notwithstanding the festive season, consumer durables reported a YoY contraction for the second month in a row, and the pace widened in October, partly attributable to the supply-side shortages,” Aditi Nayar, chief economist at ICRA, wrote in a note. Demand recovery, she said, is tentative as yet.Devendra Pant, chief economist at India Ratings & Research Pvt., concurred. A fall in consumer durables and non-durables, he said, is “testimony of weak demand” in the economy.

As Omicron Looms, Supply Is Not The Biggest Worry For Appliance Makers

Consumer electronics and appliance makers are beefing up the supply chain amid Omicron fears. But the problem lies elsewhere.

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