Japanese consumer durables major Panasonic is mulling a 5-7 per cent price hike post the festival season. Sharp depreciation in the rupee and increase in import duties have put pressure on margins, part of which will be off-set through these hikes.
According to Manish Sharma, President and CEO, Panasonic India, the hikes may come into effect mid-November or early-December onwards.
“There has been about 10 per cent rise in costs, but we will be passing on 5-7 per cent; while absorbing the rest,” he told BusinessLine.
This will be the second major hike that the company has initiated this fiscal. Around June, it raised prices 2-3 per cent, across all segments to mainly off-set the rupee depreciation.
Market sources pointed out that it is unlikely for consumer durables makers to hike prices before Diwali, despite the fall in rupee. Diwali makes up for nearly 40 per cent of the annual sales for the sector and with Onam sales being hit because of Kerala-floods, companies are unwilling to risk festive season sales demand.
“The rupee depreciation has continued. Ideally, we would look at price hikes post festival season.There could be some impact of this price rise on coming summer sales (March onwards),” said Sharma.
The rupee was trading at 73.55 on Friday afternoon, after opening at 73.83. It closed at 74.12 on Thursday.
Increase in cost
Panasonic reported a turnover of ₹10,260 crore in FY-18, with 80 per cent of it coming from business-to- consumer segment. The remaining 20 per cent is business-to-business sales. The import duty of some major components has been raised over the last few months. Hikes varied from2.5 to 5 per cent, sources say.
For instance, open cell which forms 80 per cent of the component cost for television sets, saw a duty levy of 5 per cent (initially at 10 per cent) from zero, while for other components it stood at 10 per cent (previously zero). Open cell is currently imported by all players (including the company) and it has hit costs.
“The basic customs duty on panels too was increased recently. But with Panasonic locally assembling them, costs remained under control”, said Sharma, who is also the president of the Consumer Electronics and Appliances Manufacturing Association (CEAMA),.
On compressors for ACs and refrigerators, the customs duty was increased from 7.5 per cent to 10 per cent.
Source: The Hindu