Consumer electronics bets on rural, semi-urban demand

By Ramnath Subbu

MUMBAI, SEPT. 15. One of the few industries which has positive news to report in the difficult economic scenario is consumer electronics. The reasonably good monsoon and its spread across the country has spurred sales of colour televisions, radios and washing machines in the rural and semi-urban areas.

The consumer durable industry consists of televisions and white goods which include refrigerators, washing machines, air- conditioners and audio equipment. The purchasing hierarchy is normally in the order of TV, refrigerator, washing machine and ACs. Interestingly, the Korean players such as LG and Samsung along with Whirlpool have garnered a sizable 60 per cent plus of the market. Since four years ago, BPL and Videocon had between them more than 70 per cent of the market.

Mr. Suresh Khanna, secretary general, CETMA (Consumer Electronics and Television Manufacturer's Association) said, ``The last couple of years have been bad with drought affecting parts of the country. This year, the monsoon has been better with a better spread. The white goods sector per se has been shifting to semi- urban and rural areas, agriculture driven areas, and this year's normal monsoon bodes well for the second half".Mr. K. S. Raman, past president, CETMA, said, ``The industry has grown only in the last two months and in the first six months, there was a negative growth. It is now primarily catching up with the earlier negative growth.''The high level of taxes, excise, sales and octroi, are the major deterrents to the industry growth. ``Taxes vary from 30 per cent plus in the case of black and white TVs to 55 per cent in the case of ACs," said Mr. Khanna.

For the CTV market, the rural segment accounts for 65 per cent and in the first half of of the calendar year, it had registered a fall of around 15 per cent. However, according to the industry, the situation improved significantly in July and August when it grew 18 and 21 per cent respectively. With a slew of festivals in the coming months, companies expect a reasonable growth.

Mr. Khanna said CTV sales were 4.15 lakh units in July and 4.60 lakh units in August. In the next four months, September- December, the industry hopes to sell 20-25 lakh units.The audio market fell 10-15 per cent in the first six months of the year but is likely to grow 5-7 per cent in the remainder of the year, boosted by better monsoon and rural buying.

The audio electronics industry, according to Mr. Raman, has seen good growth rates earlier largely due to the rapidly changing technology. ``From tape players to compact discs to MP3 sets, the continuous change in technology is what has kept the industry robust and growing,'' Mr. Raman said.

Refrigerator and AC sales have been affected by the early monsoon and while the AC market was growing around 25 per cent annually, this year it could grow by about 10 per cent. In refrigerators, purchases were put off due to the early onset of the monsoon.

The refrigerator segment is divided into direct cool and frost- free segment. In the former, Godrej, Whirlpool and Electrolux have more than 70 per cent share of the market while BPL, LG and Whirlpool have more than 60 per cent share in the frost-free segment. The market grew by about 4 per cent in 2000 and in 2000- 01 it registered a negative growth of 5 per cent. The industry has seen a series of price cuts by players because of competition.According to Mr. Raman, ``Today, the first priority for the consumer is a television and the second is the refrigerator. This segment has, however, not seen any phenomenal growth. Essentially, there is very little difference in features offered by the players and the functionality is the same.''

The AC segment was seeing a growth rate of 20 per cent plus annually for the last few years. It is divided into window ACs and mini-split ACs. The demand for non-ducted ACs arises from the household and corporates while the ducted systems are used in plants.

This segment is the domain of large players like Carrier Aircon, LG, Samsung, Blue Star, and Amtrex-Hitachi. Others to have entered the fray are Fujitsu General and TCL, Daikin. While Blue Star is the market leader in central ACs with a share of 30 per cent plus, LG is posing a threat to Carrier from its pre-eminent position in room ACs.

ACs witnessed a 20 per cent growth earlier but this year due to the monsoon, it was 12 per cent in the July-August period. Also, competition has been intense and while the manufacturers had geared for a 25 per cent plus growth, the lower growth has led to an inventory pile-up resulting in price cuts affecting margins. ``The summer in the north is already over so one cannot expect much change in growth rates for this calendar year,'' said Mr. Khanna.

Washing machines are divided into semi-automatic and fully automatic machines. For the five year period upto 1998, the industry grew at about 20 per cent. After this, it slowed down and has remained low largely because of poor penetration of around 5 per cent overall against China's penetration level of almost 50 per cent. The main players are Videocon, with a 35 per cent share, and Whirlpool, BPL, LG and Samsung.

Mr. Raman said, ``The washing machine industry has been in doldrums in the last couple of years. It is interesting to note that in a market like China which is also evolving, sales of equal that of CTVs.''

The CETMA, however, is confident that the washing machines segment, which witnessed a dip of 5 per cent in the last two years, will grow by about 10 per cent in the current year.

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