Company executives said production of mobile phones, televisions, refrigerators and washing machines is between 75% and 85% of original targets as inventory has built up and consumers are holding back on discretionary spending due to general inflation. This is the first time in the last five years that the industry has cut production for such a long period, which runs from April to May.
“Production is cut by 20-25% over the original plan and these cuts will continue until August as inventory has built up. Holiday production will be postponed for a month,” said Godrej Appliances commercial director Kamal Nandi.
A senior executive at one of the country’s largest electronics contract manufacturers said brands have become extremely cautious and continue to cut production of smartphones, televisions and lighting products. Most companies now plan their production on a monthly basis based on inventory levels.
The electronics industry usually starts production for the holiday season in early August, but will do so in September this year. The festive season, which begins on Onam in Kerala at the end of August and continues until Diwali, is the most important shopping period in the country, accounting for 35-40% of annual sales.
While sales of smartphones and TVs have been affected from January to February, home appliance sales started to cool off from mid-May after a good summer when high temperatures boosted demand for air conditioners and refrigerators.
Haier India Chairman Satish NS said the company is operating factories at minimal capacity. He said that the most affected are the entry-level products where the consumer segment is hit hard due to inflation. “We expect a pick-up in sales from August due to Onam and Independence Day sales. There is enough inventory for these days. We will first start with the holiday production of the mid and premium range, which is not affected much “.
Most brands have started selling products at a discount to clear inventory, and have also decided not to raise prices for the time being despite the rupiah weakening to protect any further hit to consumer confidence. The industry is hopeful that demand will increase during the festive season when supplies peak.
Mobile phone market researcher Counterpoint Technology research director Tarun Pathak said consumers are holding on to their existing devices. “While traffic at stores has decreased, it has increased at service centers with people preferring to repair their existing phones rather than buy new ones. Demand is likely to improve over the holiday season,” he said.
Senior executives of consumer goods makers have pointed to inflation as a concern for demand and the Indian economy in general, although they are optimistic there will be a recovery from the end of the July-September quarter fueled by a good monsoon, higher agricultural income, effect of the recent cooling of food and raw materials inflation, and improvement of macroeconomic indicators.