Home appliance sales to fall further

[Naveed Yaseen]

Manufacturers have unsold inventories from 2007, 2008 amid eroding purchasing power, MD of leading home appliance company says

Sunday, March 01, 2009
By Jawwad Rizvi

LAHORE: The sales of air conditioners, refrigerators, and deep freezers are likely to fall further this summer, industry sources said.

After dismal sales in the last season a tough year is ahead for the home appliance industry due to economic meltdown, they said.

Home appliance makers are converting into vendors from producers, which is an alarming situation. The existing home appliance factories are working in single shift from previous three shifts.

“The production of home appliance industry has sharply declined due to low sales, high economic cost and unavailability of power,” said Waves Managing Director and Chairman of FPCCI Zonal Standing Committee on Electrical, Electronics and Mechanicals, Parvez A Butt in an interview with The News.

“No industrial unit of home appliances has production plan for this year,” Butt said adding every company has huge carry over stocks of previous two years production.

The slump in the home appliance industry started in 2007 when the sector rolled out 1.5 million refrigerators, 0.3 million air conditioners and 0.3 million deep freezers but around 50 per cent of the production remained unsold in 2008, he disclosed.

Following decline in the sales in 2008, the industry in 2008, slashed production by 40 per cent, which is to be sold in 2009, he said.

In the current economic scenario amid shrinking purchasing power of the consumers the home appliance industry is expecting further decline in the sales.

Regarding mounting operational costs due to 20 per cent mark-up rates, Parvez said it was an extra burden along with decline in sales.

“The industry is carrying mounting inventory after sharp increase in load-shedding and it is paying 20 per cent mark up on unsold stocks,” he said.

The manufacturers pay back loans when their produce is sold, if sales fall beyond expectations, they have to pay more mark up which instead of rent on capital becomes a loss.

Explaining he said that increase in load shedding last summer eroded the white goods’ sales thus the production remained unsold.

None of the industrial unit is rolling out new production due to decline in sales, he said.

The operational home appliance factories were working at 50 per cent capacity only and these too were not producing fresh products rather implementing the past production plans.

He was of the view that the prices of home appliances were now out of the reach of common man. Similarly, due to high mark-up rates the financing costs of home appliances on instalments have also gone upwards which also eroded the sales.

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