White Goods makers are all set to turn the champions of Make in India
Published Date | 2018 November 22
Manufacturers of white goods like washing machines and refrigerators, etc. are all set to launch a make in India thrust. This will immensely accelerate the growth of white goods sector in the consumer goods industry.India: The Producers of washing machines, refrigerators, and air conditioners are all set to launch a Make in India drive, reflecting those in televisions and smartphones after the import duties were increased by the government. Excess investments of INR 6,500 crore have already been lined up in the white goods sector for the following two years, with more in the pipeline. The manufacturing drive is due to hike in import duties on white goods along with their components in September amidst a decline in the value of the rupee and is intended at keeping the current account deficit in check. The Make in India initiative by the government is meant to encourage investments in production and generate more jobs. This will positively boost the white goods sector in the country. Germany's Bosch and Siemens, China’s Midea, Turkey’s Arcelik, Japan’s Panasonic Haier and TCL, along with domestic brands such as Godrej and BPL are planning to invest in manufacturing as well as backward integration into parts. Shanghai Hitachi Electrical Appliance Co., which is a joint venture between Shanghai Highly Group of China and Hitachi Japan, is increasing its compressor unit which is based in Gujarat, whereas Guangdong Meizhi Compressor Co. is setting up a new manufacturing plant to produce the devices that are found in cooling units. According to Gunjan Srivastava, managing director of BSH Household Appliances, which sells Bosch and Siemens machines in India, “After the recent import duty hike by the government, it is no more a question whether to locally produce or import and sell. We need to invest in local manufacturing and create a Make in India base, otherwise, it will be difficult.” Manish Sharma, CEO of Panasonic India said that the company has initiated talks with suppliers in order to manufacture components like AC compressors. The government of India had increased import duties on smartphones and televisions in the month of December last year to about 20%, while those who are on their components had seen hike this year. This led to a bustle of manufacturing investments from the makers of TV and smartphone. The white goods industry has the impression that import duties may further rise, as it happened with televisions and smartphones, to strengthen the Make in India pitch. According to BlueWeave Consulting, The Central government has doubled customs duties on washing machines, refrigerators and air-conditioners to around 20% in September in order to curb non-essential imports, while it also increased duties on compressors for refrigerators and air conditioners from 7.5% to 10%. This has led to a total increase of 10% in the price of imported appliances. BSH is planning about investing 100 million euros which is about INR 800 crore for installing a refrigerator factory near Chennai after they recently started manufacturing washing machines. Earlier in the month of November, the Midea Group announced a manufacturing investment of INR 1,350-crore, out of which nearly half will be for compressors. Krishan Sachdev, Managing Director in India said, “This will be the Midea Group’s largest manufacturing investment outside China.” The top appliance maker of China, Haier has confirmed plans to invest INR 3,000 crore in their new plant in Noida, which they did thrice for their existing unit based in Pune. The Noida plant will be manufacturing components and premium models according to Haier Appliances India president Eric Braganza. According to Kamal Nandi, Godrej Appliances business head and president of the Consumer Electronics and Appliances Manufacturers Association (CEAMA) lobby group other than the import duty hike, brands which are importing from countries with which India has even signed free trade agreements (FTAs) have recognised that manufacturing locally might be cheaper owing to lower labour costs and no payment for high freight costs from overseas. Thus, this initiative by the manufacturers of white goods will positively impact the white goods sector of consumer goods industry. According to the upcoming report by BlueWeave Consulting on “Global White Goods Market, By Type, By Distribution Channel, By Region- Industry Analysis, Size, Share, Growth, Trends & forecast by 2018-2025”, the market is expected to grow with a significant CAGR during the forecast period. Increases in standards of living, especially in the Asia Pacific region along with increasing disposable income of households, people are able to make purchases beyond their basic human necessities. This is leading households to purchase electrical appliances, which were earlier looked upon as luxury items. Technological advancements along with increased disposable income are driving the global white goods market.