Rupee likely to rain on handset makers’ Diwali

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NEW DELHI: Diwali will lose some lustre for handset makers forced to raise prices of new mobile phones by at least 7%, especially for featurephones and lower-end smartphones, with the rupee touching record lows against the dollar.

What may have saved handset makers from a deeper immediate impact in the lead-up to the festival of lights is the that they have already locked in inventory — devices or components — to last till end September or early October at higher rupee-dollar levels. But all new inventory will be billed at the lower rupee-dollar levels, and thus priced higher. Hence, the local currency’s continued fall could inflict a deeper pain for overall October-December, analysts and industry executives said. “There would be some impact on the sales during the festive season due to this (rupee weakening) and also because of increasing diesel prices.

There will be some decline. Online players might try to compensate via discounts. But there will be some negative impact,” Pankaj Rana, mobility head at Japan’s Panasonic, told ET. Comio India CEO Sanjay Kalirona concurred, saying, “Brands are already cautious.” Faisal Kawoosa, an independent analyst, said he did not see major impact due to the already locked-in inventory. Panasonic and home-bred Lava have already adjusted some prices at the month’s beginning.

Bigger brands like Xiaomi and Samsung have not changed pricing but are closely monitoring it along with players like Vivo and Comio. “Depreciated rupee is building up a lot of pressure for all brands, and if the rupee continues to depreciate at this rate, we will have to re-evaluate the prices of smartphones towards the end of this year,especially for newly launched Redmi 6A and Redmi,” a Xiaomi spokesperson told ET. India Cellular and Electronics Association (ICEA), which represents most handset makers including Xiaomi, Oppo, Vivo, and domestic brands, said the impact “is significant, that is, more than 12% and is impacting bottom lines very hard.”

“The impact is severest in the featurephone segment which is engulfed in hyper competition. Industry now has no way but to raise prices and in the higher end, curtail price drops. We expect a minimum price adjustment of 7% to begin with,” Pankaj Mohindroo, ICEA chairman, said.

Handset vendors like HMD, maker of Nokia phones, and Vivo said they are holding prices of existing models but closely monitoring rupee levels to take decisions accordingly. Other major players Samsung, Oppo and Micromax didn’t respond to ET’s queries. CMR’s analyst Prabhu Ram said sub-Rs 10,000 and Rs 20,000 range brands will have to relook at pricing strategies.

Comio’s Kalirona said every single handset brand is currently absorbing the higher cost of around 8-10%. “The market situation is such we are not able to increase prices due to the intense competition.” But Panasonic and Lava have bitten the bullet.





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