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Consumer Durables Industry in India PDF
Consumer Durables Industry in India PDF
BRIEF REPORT
ON
July, 2015
1.1 Overview
Share in the consumer durables
India is expected to become the fifth largest consumer
market in India (FY15)
durables market in the world by 2025. The consumer
electronics market is expected to increase to USD 400
billion by 2020. The production is expected to reach Rural,
USD 104 billion by 2016.The sector is expected to 35%
double at 14.7 per cent compound annual growth rate
(CAGR) to USD 12.5 billion in FY15 from USD 6.3 Urban,
billion in FY10. 65%
The Government of India has increased liberalisation which has favoured foreign direct investments
(FDI). Also, policies such as National Electronics Mission and digitisation of television and setting
up of Electronic Hardware Technology Parks (EHTPs) is expected to boost the growth of this
sector.
The consumer durables market is anticipated to expand at a CAGR of 14.8 per cent to USD 12.5
billion in FY15. Also, the demand from rural and semi-urban areas is projected to expand at a
CAGR of 25 per cent to USD 6.4 billion in FY15, with rural and semi-urban markets likely
contributing majorly to consumer durables sales.
A brief report on Consumer Durable Industry in India
The Indian Consumer Durables segment can be segmented into three groups:
White Goods
Consumer
Electronics
Brown goods
1400 1305
1200
1000
800 735
618
600 514
435
400 257 262 223231
200 101 81 86 122 87 96 140 108
87 74 77 93
37 47 68
0
2009 2013 2014 2015E 2016E 2020E
Washing Machine Refrigerator Air Conditioner Televisions
A brief report on Consumer Durable Industry in India
2. MAJOR PLAYERS
Samsung India commenced its operations in India in December 1995, today enjoys a sales turnover
of over USD 1 billion in just a decade of operations in the country. Samsung design centres are
located in London, Los Angeles, San Francisco, Tokyo, Shanghai and Romen. Samsung India has its
headquartered in New Delhi and has a network of 19 Branch Offices located all over the country.
The Samsung manufacturing complex housing manufacturing facilities for Colour Televisions,
Colour Monitors, Refrigerators and Washing Machines is located at Noida, near Delhi. Samsung
‘Made in India’ products like Colour Televisions, Colour Monitors and Refrigerators are being
exported to Middle East, CIS and SAARC countries from its Noida manufacturing complex.
Samsung India currently employs over 1600 employees, with around 18% of its employees working
in Research & Development.
Whirlpool was established in 1911 as first commercial manufacturer of motorized washers to the
current market position of being world's number one manufacturer and marketer of major home
appliances. The parent company is headquartered at Benton Harbor, Michigan, USA with a global
presence in over 170 countries and manufacturing operation in 13 countries with 11 major brand
names such as Whirlpool, KitchenAid, Roper, Estate, Bauknecht, Laden and Ignis. Today,
Whirlpool is the most recognized brand in home appliances in India and holds a market share of
over 25 per cent. The company owns three state-of-the-art manufacturing facilities at Faridabad,
Pondicherry and Pune.
1.6 LG India
LG Electronics was established on October 1, 1958 (As a private Company) and in 1959, LGE
started manufacturing radios, operating 77 subsidiaries around the world with over 72,000
employees worldwide it is one of the major giants in the consumer durable domain worldwide. The
company has as many as 27 R & D centers and 5 design centers. Its global leading products include
residential air conditioners, DVD players, CDMA handsets, home theatre systems and optical
storage systems.
Godrej India was established in 1897. The company was incorporated with limited liability on March
3, 1932, under the Indian Companies Act, 1913. The Company is one of the largest privately-held
diversified industrial corporations in India. The Company has a network of 38 Company-owned
Retail Stores, more than 2,200 wholesale dealers, and more than 18,000 retail outlets. The company
has Representative Offices in Sharjah (UAE), Nairobi (Kenya), Colombo (Sri Lanka), Riyadh (Saudi
Arabia) and Guangzhou (China-PRC).
A brief report on Consumer Durable Industry in India
Sony Corporation, Japan, established its India operations in November 1994. In India, Sony has its
distribution network comprising of over 7000 channel partners, 215 Sony World and Sony Exclusive
outlets and 21 direct branch locations. The company also has presence across the country with 21
company owned and 172 authorized service centres.
Hitachi India Ltd (HIL) was established in June 1998 and engaged in marketing and sells a wide
range of products ranging from Power and Industrial Systems, Industrial Components &
Equipment, Air Conditioning & Refrigeration Equipment to International Procurement of software,
materials and components. Some of HIL’s product range includes Semiconductors and Display
Components. It also supports the sale of Plasma TVs, LCD TVs, LCD Projectors, Smart Boards
and DVD Camcorders.
A brief report on Consumer Durable Industry in India
2. GOVERNMENT INITIATIVES
2.1 Government Initiatives
The Indian Government is majorly concerned about the development of rural markets and hence,
keeps introducing policies and initiatives to encourage their growth.
In a bid to make economic development inclusive, the Indian Government has initiated many
schemes and programs that aim at improving the standard of living in India villages or rural areas.
For instance, the Government launched a time-bound business plan for action called Bharat Nirman
for enhancing the infrastructure in hinterlands. Under this program, action is proposed in the areas
of Water Supply, Housing, Telecommunication and Information Technology, Roads, Electrification
and Irrigation. The other initiatives are:
National Policy on Electronics (NPE) 2012 was launched with an objective to transform India
into a global hub for Electronic System Design and Manufacturing (ESDM) and to expand the
manufacturing base of electronic products in India. Key goals for 2020 are to attract investment
of USD 100 billion, enhance exports to USD 80 billion, achieve a turnover of USD 400 billion
and create employment of around 28 million
As per Foreign Trade Policy (2015-2020), the Focus Product Scheme, Market Linked Focus
Product Scheme and Focus Market Scheme are now under a single MEIS scheme. Export of
notified goods (includes Ac parts and compressors, refrigerating equipment compressors, fully
automatic washing machines and color TV) and Asia-Oceania block) will be payable as
percentage of realized FOB value (in free foreign exchange). Moreover, there will be a provision
for higher level of rewards under MEIS scheme for export items with high domestic content and
value addition.
According to the Modifies Special Incentives Package Scheme (MSIPS) the government will
reimburse certain taxes and duties for 10 years, amounting to 20% (SEZs) to 25% (non-SEZs)
of capital investment. However, white goods are not covered in this scheme and are in the draft
MSIPS document.
Zero duty EPCG scheme allows import of capital goods for pre-production, production and
post-production (including CKD/SKD thereof as well as computer software systems) at zero
Customs duty. As per the Foreign Trade Policy 2015-20 the specific export obligation under
EPCG scheme where capital goods are procured from indigenous manufacturers has been
reduced to 75% from 90% in order to promote domestic capital goods manufacturing industry.
An Electronics development fund of USD 2 billion has been created to promote innovation,
intellectual property creation, product commercialization etc.
A brief report on Consumer Durable Industry in India
3. CHALLENGES, OPPORTUNITIES & FUTURE PROSPECTS
The consumer durables sector in India is one that will be passing through some very interesting
times. On the one hand there is substantial scope for expansion as the favourable demographics of
India are a positive for the sector.
On the other hand there are many factors which pose as a challenge to this industry, some of these
challenges are:
Increasing competition:
Indian manufacturers face strong competition from Chinese and other SE Asian counterparts
which have a huge supply base and installed capacities. Moreover, China government provides
numerous subsidies for manufacturing unit development which the Indian government is unable
to match.
Infrastructure Deficiency:
India’s spend on infrastructure was only 7.2% of its GDP in 2012. The basic infrastructure for
any industry comprises good roads, power, water, telecommunications, finance, raw materials,
components, and logistics. In India, these facilities are not up to the mark even in established
industrial estates.
Domestic markets are growing at a brisk pace with continued dependence on imports. About
30-35% electronic components required for local equipment manufacturing are available from
domestic sources. For semiconductors, there is almost 100% dependence on imports.
A brief report on Consumer Durable Industry in India
Inverted Duties due to dual use of Inputs such as Plastics, Copper, Aluminum, etc continue to
plague hardware manufacturers. Specific items are covered under Customs Notification 25/99,
although the procedure for claiming this benefit is extremely convoluted and time taking.
Domestic Taxes and Levies impose Fiscal Disabilities with very high indirect taxes
Cascading impact of CST on components detrimental for finished products manufacturing
High cost of Finance, Power and Logistics/ Regulatory and Procedural problems add to
disabilities estimated at 7-8%. This discourages capital intensive, high value add investments in
manufacture of components / parts which require high and long term investments necessitating
a supportive fiscal and infrastructural environment.
3.2.1 Strengths
Presence of established distribution networks in both urban and rural areas
Presence of well-known brands
In recent years, organized sector has increased its share in the market vis a vis the unorganized
sector.
3.2.2 Weaknesses
Demand is seasonal and is high during festive season
Demand is dependent on good monsoons
Poor government spending on infrastructure
Low purchasing power of consumers
3.2.3 Opportunities
In India, the penetration level of white goods is lower as compared to other developing
countries.
Unexploited rural market
Rapid urbanization
Increase in income levels, i.e. increase in purchasing power of consumers
Easy availability of finance
3.2.4 Threats
Higher import duties on raw materials imposed
Cheap imports from Singapore, China and other Asian countries
India is emerging as the third largest internet market and its e-commerce business is likely to touch
Rs 40 billion (USD 742.76 million) in 2015 against Rs 12 billion (USD 222.83 million) at present.
Also, with mobiles becoming a major medium for advertising and content delivery, every three out
of four users in the country are expected to access the net through a mobile phone by 2015. During
2012-22, cumulatively around USD 500 billion of ad spend is expected to happen on mobile phones,
according to industry estimates.
A brief report on Consumer Durable Industry in India
Moreover, companies in the last decade have positioned tea and coffee as recreational products,
which have majorly attracted younger population. Growing at a compounded annual growth rate
(CAGR) of 20 per cent, it is expected to touch Rs 330 billion (USD 6.13 billion) by 2015 from the
current level of Rs 195 billion (USD 3.62 billion) (in 2011). Domestic coffee outlets, which have a
lot of appeal for the new generation, are set to double over 2012-15, majorly driven by the foray of
global players such Starbucks and Dunkin’ Donuts in India.