This is the second time this year that companies have resorted to production cuts. After the first cut during April-July, output had normalised and had even grown year-on-year in the run up to the festive season in August to early October, industry executives said.
For smartphones, market researcher Counterpoint estimates there was a 35% year-on-year decline in sales in November, with the entry segment witnessing a sharper fall at more than 50%. For home appliances and electronics, the year-on-year decline in sales was 15-20% last month, as per industry estimates.
“Companies are cutting down production due to a steep decline in demand post Diwali, with the entry segment the worst hit. For instance, the 32-inch television used to contribute 50% of total sales last year but is now down to 35%. The story is the same for mobile phones,” said Pradeep Jain, managing director of Jaina Group, which manufactures smartphones and electronics for several brands besides retailing its own Karbonn brand.
LG Electronics India vice-president Deepak Bansal said the market sentiment was subdued due to inflation and layoffs in the technology sector and fear of a slowdown impacting earnings. This has forced the industry to cut production, but a recovery is expected early next year as factors like inflation may reduce by then and seasonal sales pickup, he said.
Every year after Diwali demand becomes muted, but this year has been the worst in 5-6 years, with even the largest trade partners refusing to pick up stock, industry executives said.
Tarun Pathak, research director at Counterpoint Research, said there had been a steep decline in sales in November with no new launches. Unsold inventory of the brands is closer to eight weeks as compared to the normal 4-5 weeks, he said. “December will be slightly better due to new year sales, but again the next quarter overall will be extremely low. This pressure will stay till the next April-June quarter. As a result, brands are adjusting production.”
The focus now is more on the production of summer products like AC and deep freezer, cutting down on others, Haier India president Satish NS said. The company had shut production for 10 days after Diwali.