NEW DELHI : The continued weak point within the rupee towards the greenback is about to set off one other spherical of worth will increase by client electronics makers after the festive season gross sales conclude.
The rupee has fallen virtually 9% towards the greenback to this point this fiscal to succeed in a brand new all-time low of ₹82.32 on Friday.
Analysts stated whereas the continued pageant gross sales are seeing enticing offers on digital objects, costs might rise considerably put up the gross sales.
“The rupee slide will definitely have an effect on costs,” said Navkendar Singh, associate vice president, devices research at IDC India, South Asia, and ANZ. He said vendors can’t afford any impact on already-subdued demand during the festive period, but will have to undertake price corrections eventually. A fresh round of across-the-board price increases can be expected in November, said Singh.
“We’re expecting a 5-7% increase in (smartphone) prices once the festive season ends, say in November or December, on account of the exchange rate increase. All the new models, including those on 5G, will see a price hike,” stated Prachir Singh, senior analysis analyst at Counterpoint Research.
Sanyam Chaurasia, know-how market analyst at analysis agency Canalys, too, stated distributors can not additional bear the stress of a weak rupee and must cross it on to customers. Foreign foreign money has been a problem for corporations for the final 18-20 months, and “if this continues, we are able to count on one other spike in (the worth of) units within the coming months,” said Chaurasia.
Smartphone manufacturers in India are exposed to currency fluctuations as they still assemble phones from semi-knocked down (SKD) kits instead of doing full manufacturing. Companies, therefore, import parts such as displays and integrated circuits in a partially disassembled state for making the final product. A weak rupee inflates the cost of such parts and also that of the finished product.
“There is almost a 97-98% SKD for most of the smartphone vendors. If you import, you have to pay additional forex. The strengthening of the dollar and rupee depreciation will further impact the vendors,” he stated.
Consumer electronics makers are a apprehensive lot. “The rupee depreciation is the largest problem in the meanwhile, resulting in decreased margins and a rise in working capital,” said Arjun Bajaj, chief executive of Daiwa, a homegrown TV brand. Bajaj, who is also the director of TV maker Videotex International, said talks have already begun in the industry about suppliers raising raw material prices. He added that price revisions will be decided next month.
Similarly, Prashanth Mani, managing director of Motorola Mobility India said gains from lower component prices, especially of semiconductor chips, have been offset by a weak rupee.
“The (input) costs are coming down but the exchange rate is going up, so it kind of nullifies itself. Let’s say, you’re getting a 5-10% reduction, but the exchange rate has gone up by 12% over the last six months, so that’s the challenge,” he stated.
Mani stated that corporations are holding onto costs for present shares however will likely be compelled to cross on the upper prices to customers for recent stock.
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