Companies such as Usha International, Panasonic, Havells, etc. have a partially limited capacity in their factories. Some have done so on the grounds of employee safety.
Shashi Arora, president and CEO of Lloyd, the durable consumer goods division of Havells India, said April was the peak season for air conditioners for which the company is starting to build inventory from of December. However, this year sales were only strong until the first two weeks of April.
As a result, the company reduced production at its air conditioner factory in Ghiloth, near Neemrana, Rajasthan, about 90 km from Delhi.
“Although we started reducing production from May, we have already reduced even more this year due to the prevailing situation and lower demand. In short, we had three shifts at the factory and we reduced it to one shift, ”he said.
Lloyd manufactures air conditioners and started selling refrigerators six months ago. It also manufactures semi-automatic washing machines through supplier partners.
The company expected strong growth in its refrigerator business, which is now marred by a slowdown. “The refrigerators are made by contract manufacturers and we’ve told them to cut production for us by 25%. In March, no one could have predicted this drop and we had big plans for our line of refrigerators, ”said Arora.
Last week, the local branch of the Japanese electronics company Panasonic suspended manufacturing at its factory in Jhajjhar, Haryana, where it manufactures consumer durables and welding machines. The decision was made with employee safety in mind. Its factories of electrical products which manufacture outlets, switches, etc. operate at low capacity, the company said.
Panasonic, which manufactures air conditioners and refrigerators, among others, reviews the situation weekly and will take a call to continue production depending on the outside environment.
Manish Sharma, President and CEO, India and South Asia, Panasonic said that with a few states imposing partial lockdowns, the company is anticipating some disruption in the supply chain across regions.
“However, with the kind of growth we’ve witnessed over the past few months, also anticipating that pent-up demand will return once the markets reopen, we are confident that the next quarter will see a recovery, although we could see a loss. 35-40% compared to projections in the current quarter, ”he said.
Covid cases in India increased in April, prompting several states to go under curfew. Maharashtra, Karnataka and Delhi have been blocked. Odisha announced a 14-day lockdown starting May 5. Most states have ordered non-essential stores to close, major markets and shopping malls remain closed, affecting retail sales and consumer mobility.
Home appliance manufacturers and retailers had started to experience a significant recovery in March and businesses were gearing up for a strong summer season.
Rohit Mathur, president, electric fans, pumps and water heaters at Usha International, said the market situation is “extremely volatile” for most consumer durables companies. The company has already cut production by 30-35% for fans due to lack of demand. The room cooler category has seen a more marked reduction, but all of its plants are operating at lower capacity.
“There is definitely a drop in demand because consumers have been hit hard by covid 19 and because there are varying degrees of foreclosure in different states,” Mathur said.
Mathur said that Usha’s suppliers had also been affected – the company facing a shortage of raw materials. “We have vendors all over northern India in places like Uttarakhand and Himachal Pradesh. There is a shortage of raw materials and getting all of the components is also a challenge. The entire chain is affected as mobility is restricted in various states, ”he said.
In the first quarter of this year, when fans will see their sales drop by 30-35%, room coolers will be hit hardest, he said.
Mathur said consumers are not buying as households face medical emergencies. This makes it difficult to predict an increase in consumer demand, he said.
As consumers prioritize personal health amid the spread of covid, expensive discretionary items could take a beating. “This year’s tragedy is very different from last year. Online sales have also fallen. Consumer sentiment has been hit very hard because it has been physically affected, ”he said.