GST rate cut: Refrigerators, washing machines, kitchen appliances to be cheaper from today

GST rate cut: Refrigerators, washing machines, kitchen appliances to be cheaper from today

Consumer appliances like refrigerators, washing machines, small screen TVs, vacuum cleaners and sundry kitchen essentials will now cost 7-8 per cent less, as companies prepare to pass on the benefits of the recent GST revisions. Last week the Modi government had announced the biggest GST rate cut since last November and slashed the levy on several white goods and commonly used kitchen appliances like mixer-grinders and juicers by 10 per cent – from the highest tax bracket of 28 per cent to 18 per cent. The new rate comes into effect today.

According to The Economic Times, with this development, the total taxation amount on several consumer electronic products is now lower than what it was during the earlier VAT regime, when it stood at around 26.5 per cent. Better still, industry insiders claim that prices will come down to nearly a two-year low.

“With the revision of GST rate on refrigerators and washing machines, there will be a reduction of price to the tune of 7-8 per cent for the end consumer. Godrej will pass on the entire benefit of GST reduction to the consumers,” said Godrej Appliances Business Head and Executive Vice President Kamal Nandi, adding that the rate cut will provide relief to the appliances industry.

“The revision will make refrigerators and washing machines more affordable which will accelerate the penetration of these appliances across India. This, in turn, will lead to a spur in demand which will lead to increase in production and, hence, have a positive impact on the GDP,” he explained.

Korean consumer durable majors LG has likewise committed to pass on the full benefit of the GST rate cut to the consumers. Citing sources in the know the daily added that the company has dropped prices by 8-9 per cent, while Samsung and Godrej will be reducing prices by more than 7.81 per cent across all products that got a tax cut. Panasonic’s net price cut is between 7-8 per cent.

The price cuts vary because some companies have passed on the complete benefit of the tax cut while keeping dealer prices intact but some brands have also reduced the dealer price, thus increasing the net price cut. The tax component is calculated on dealer price to arrive at the product’s maximum retail prices.

So LG has revised the price of its 335-litre frost-free refrigerator price from Rs 46,490 to Rs 42,840 – a price drop of 8.5 per cent – and a 6.2 kg top load washing machine is now 8.7 per cent cheaper at Rs 18,390. On the other hand, a Godrej 190-litre direct cool refrigerator is now priced 7.8 per cent lower at Rs 15,257, against Rs 16,550 earlier.

Godrej Appliances business head Kamal Nandi told the daily that for the stock already in trade, the manufacturers will supply new pricing labels to the retailers mentioning the new MRP, which they will stick on the product packaging. So if you are going shopping for one of the products that recently enjoyed a tax cut, check for reduced prices before you pay up.

The industry is optimistic that the tax cut will fuel demand and provide a new impetus for growth, especially ahead of the upcoming festive season. The Indian consumer, after all, has largely been holding back on discretionary spending since demonetisation in November 2016.

“The goods to benefit the most will be washing machines and refrigerators, where we expect growth to pick up substantially. The reduced taxes in television sets of up to 26 inches will ensure increased penetration and affordability in smaller parts of the country. We plan to pass on the complete benefits translating to around 7-8 per cent,” said Manish Sharma, president and CEO, Panasonic India and South Asia and President, CEAMA.

However, if you are planning to buy a larger-sized LED TV – 32 inches or more – you’d best do so in a hurry. Because the buzz is that their prices will go up next month.

Bosch Home Appliances to invest 100 mn Euro to expand in India

Bosch Home Appliances to invest 100 mn Euro to expand in India

Bosch Home Appliances will invest 100 million Euros over the next 3-4 years towards personalizing solutions, brand building, strengthening its technology centre, and setting up a robust refrigerator factory to bring its best-in-class German technology in India and magnifying India’s role globally, the company said in a statement.

In the coming years, Bosch will take its offerings from conventional to digital and transform businesses beyond mobility, by focusing on connectivity and new digital business models for customer value, as well as extending new employment opportunities in the space.

According to the company, India’s household appliances market is expected to grow at 14.5 percent annually (CAGR 2018-2022), resulting in a market volume of USD 2,028 million by 2022. Bosch India expects its business in this sector to grow significantly over the coming years. In line with this insight, Bosch has steadily expanded its product portfolio, with a major focus on localized offerings and India-first innovations built with the highest quality of German engineering, the company said.

BSH Household Appliances which started operations in the country in 2010, has launched new categories like fully automatic top loader washing machines, small appliances, and freestanding microwave ovens here this year. The company has also launched its luxury range Gaggenau in India this year which includes an entire range of built-in home appliances like refrigerators, dishwashers, cooking appliances.

“We want to remain the consumers’ first choice. Innovation and technology are the key pillars at BSH Household Appliances and we are constantly working towards simplifying the day-to-day lives of consumers by reinventing and regionalizing solutions and accessories including branded detergents for washing machines and dishwashers,” said Gunjan Srivastava, Managing Director, and CEO, BSH Household Appliances.

BSH sells its products through 55 exclusive Bosch outlets, 25 Siemens outlets, large format stores like Croma and Vijay sales along with hundreds of direct dealers. The company is still in the process of building its distribution channel and expanding its retail presence. BSH currently manufactures front-loading washing machines in its 42-acre facility around Chennai in Tamil Nadu. The company will soon start manufacturing other appliances in this facility as well.


LG Appliances and TV Earnings at Record Levels but No G5 Boost for Mobile Division

LG Appliances and TV Earnings at Record Levels but No G5 Boost for Mobile Division

South Korea’s LG Electronics Inc on Thursday posted its highest quarterly operating profit in two years, thanks to record appliances and television earnings that offset another loss for the mobile division.

The world’s second-largest TV maker behind SamsungElectronics Co Ltd said in a regulatory filing its April-June profit more than doubled from a year earlier to KRW 585 billion ($521 million), matching its earlier guidance.

LG said it expected July-September operating profit to be higher than the KRW 294 billion profit it reported a year earlier, while revenue would be similar to the 14 trillion won recorded in the third quarter of 2015.

Operating profit for the appliances division jumped 49 percent from a year earlier to a quarterly record of KRW 433.7 billion, the company’s top earner for the seventh straight quarter as sales of premium products continued to support margins.

LG’s TV division swung to a profit of 356.7 billion won, also a quarterly record, boosted by sales of high-end televisions and improved cost structure amid declining panel prices.

The mobile business continued to struggle, however, reporting a KRW 153.5 billion operating loss, the fifth straight quarter in the red as sales of the flagship G5 fell short of expectations.

The company in April guided for a sharp second-quarter rebound in mobile earnings on G5 sales. The phone was received positively by critics for allowing users to upgrade functions such as the camera through attachable modules.

But initial manufacturing problems undermined early momentum for the G5, analysts said, leading to disappointing sales.

The firm said the third quarter would remain difficult for the business though its performance would improve as new products launched.

LG’s second-quarter revenue rose 0.6 percent to KRW 14 trillion, matching its guidance for earlier this month.

© Thomson Reuters 2016

Tags: Home Entertainment, LG, LG Display, LG G5, Mobiles

Flipkart bets on large appliances to power next stage of growth

Flipkart started selling large appliances again in early 2014, nearly a year after it was forced to withdraw these products because of customer complaints about late deliveries and poor quality of products. Photo: Hemant Mishra/Mint

Flipkart started selling large appliances again in early 2014, nearly a year after it was forced to withdraw these products because of customer complaints about late deliveries and poor quality of products. Photo: Hemant Mishra/Mint

Bengaluru: India’s largest e-commerce firm Flipkart Ltd is banking on sales of high-priced products such as television sets, refrigerators and air conditioners to help the company maintain its sales growth trajectory this year.

Flipkart started selling large appliances again in early 2014, nearly a year after it was forced to withdraw these products because of customer complaints about late deliveries and poor quality of products. The company has set up a separate logistics network for the category.

Since early 2014, when it launched sales of TVs in Bengaluru, the company has added washing machines, air conditioners, microwave ovens and other products, and now sells these items to customers in some 6,000 pin codes across India.

In the Diwali quarter ended December, Flipkart sold nearly 500,000 units of large appliances, including 250,000 TV sets, said Amit Bansal, business head of appliances at Flipkart. This accounted for roughly a fourth of all TVs sold in India in that period, he said. The company expects to increase sales of large appliances by three times this year, compared with 2015.

“Over the next two years, (large appliances) is going to be one category that’s going to drive revenue growth for Flipkart. This category is built on customer service. The biggest lever we’re going to use is bringing down the cost of ownership, whether it’s offering high-end technology at disruptive prices or offering the kind of financial arrangements nobody has seen before,” Bansal said.

After the company’s bumper Big Billion Day sales week, some of the biggest consumer electronics brands, which were earlier hostile to all online retailers, entered talks to start selling on Flipkart, he said, but declined to name the brands.

In the past 18 months, many consumer electronics brands such as Sony, Videocon, Lenovo, Dell and Canon had warned shoppers against purchasing products on e-commerce marketplaces. However, as e-commerce became popular with consumers, brands are coming around to the reality that they can’t afford to be absent online.

“Diwali really shook up the market. It helped make brands realize that e-commerce is not just another channel, it could be the channel to growth. There is a shift happening in the mindset of brands. And we want to be the platinum partner of choice for global brands. Over the past few months, we’ve had discussions with a handful of global brands (that aren’t selling online) and things are moving in the right direction,” Bansal said.

For Flipkart, large appliances will be a key battlefront with arch-rivals Amazon India (Amazon Seller Services Pvt. Ltd) and Snapdeal (Jasper Infotech Pvt. Ltd). The average price in this category is more than 10 times that of other products.

“Consumer durables is a very interesting category for online and vice versa,” said Harminder Sahni, managing director at Wazir Advisors. “It’s standardized and branded so trust is not an issue and it’s crowded so consumers will want to compare products which e-commerce offers. This category will be important for Amazon, Flipkart and Snapdeal. Not only is it a high-ticket category, it is also not evolved online. While the three companies offer these products, no one has really cracked it. Customer experience is still not always great. So whoever is able to provide that will emerge as the winner.”

Sales of consumer durables in India are expected to touch nearly $21 billion by 2020, according to a July 2015 report by Consumer Electronics and Appliances Manufacturers Association and EY, a consultancy.

Large appliances is a nascent product category. The two biggest online product categories so far, smartphones and fashion, are already intensely competitive. E-commerce companies haven’t yet focused on sales of large appliances partly because it is particularly challenging to deliver these products quickly, consistently and in a viable manner. For instance, getting a 6-ft-high refrigerator or an air conditioner to a customer is far tougher than delivering a smartphone or a pair of jeans.

Bengaluru-based Flipkart, which is valued at $15 billion, is leading the growth of large appliances among e-commerce firms. Its dedicated logistics network for this category helps the company deliver a majority of orders for large appliances in roughly three days. It claims to deliver some 97% of orders within the time it promised customers.

Apart from setting up a separate supply chain network for this business, Flipkart is getting brands to launch TVs, washing machines and refrigerators exclusively for its customers. Some products from brands such as Vu, BPL, Sansui and Whirlpool are available only on Flipkart.

The company also bought a large stake in Jeeves Consumer Services Pvt. Ltd, which provides after sales service for large home appliances and electronics, in November 2014. Jeeves provides installation, maintenance, repairs, product guarantees and after sales services on TVs, washing machines and other products.

“The biggest piece in large appliances that defines customer experience is how well you deliver the product and how well and quickly you can instal the products. With Jeeves we’re able to give a spot-on delivery time and a spot-on installation time to customers. Earlier, the installation turnaround time was 72 hours after delivery for TVs. Now, one in five TVs sold on Flipkart is installed at the same time,” Bansal said.