Introduction

With the continuous inflow of disposable income and the advancement of technology, the need for
the varied consumer durable goods are increasing. This in turn is leading to a strong competition
among the different consumer durable brands available in the nation as well as the price gap
between the same consumer goods of different companies are narrowing down. Day by day these
goods are becoming cheaper. The rural and urban market of consumer durables has been growing
at a rate of around 15 % on an average.

Growth prospects
India is likely to emerge as the worlds largest middle class consumer market with an aggregated
consumer spend of nearly US$ 13 trillion by 2030, as per a report by Deloitte titled 'India matters:
Winning in growth markets'.

Fuelled by rising incomes and growing affordability, the consumer durables market is expected to
expand at a compound annual growth rate (CAGR) of 14.8 per cent to US$ 12.5 billion in FY 2015
from US$ 7.3 billion in FY 2012. Urban markets account for the major share (65 per cent) of total
revenues in the Indian consumer durables sector. In rural markets, durables, such as refrigerators,
and consumer electronic goods are likely to witness growing demand in the coming years. From
US$ 2.1 billion in FY 2010, the rural market is expected to grow at a CAGR of 25 per cent to touch
US$ 6.4 billion in FY 2015.

Some of the top consumer durables brands in India are:

LG

Nokia

Philips

Samsung

Sony

Whirlpool

Blue Star

Carrier

Godrej India
 Hitachi India Limited

Sharp India Limited

Tata

Toshiba India Private Limited

Videocon

Voltas

About Consumer Durables

Consumer durables refer to those consumer goods that do not quickly wear out and yields utility
over a long period of time. Some of the popular and common examples of these kinds of items are
electronic goods, kitchen appliances, home furnishings and leisure equipments etc. Consumer
durables can be broadly categorized into the following 3 heads:

White Goods: White goods mainly include air conditioners, refrigerators, washing machines, audio
equipments and speakers.
Brown Goods: This kind of consumer durables mostly include kitchen appliances like chimneys,
electric fans, grinders, iron, microwave ovens, mixers and varied other cooking ranges.
Consumer Electronics: Some of the mostly used consumer electronic goods are DVD players, MP3
players, mobile telephones, telephones, VCD players etc.

2
Indias consumer durables industry is valued at $9.7 billion as of 2015. This sector is expected to grow to $20.6 billion
by 2020 and become the fifth largest in the world by 2025.
The consumer durables industry can be categorized into two segments:
Consumer electronics (brown goods) such as televisions, laptops, cameras, computers, and audio
systems
Consumer appliances (white goods) washing machines, kitchen appliances, microwave ovens, cleaning
equipment, air conditioners, and fans
About two-thirds of Indias consumer durables are currently sold in urban markets. The most popular consumer
electronics are color television sets. Electric fans and air conditioners are popular due to Indias hot climate. Other top
consumer durables include refrigerators and washing machines.
The majority of consumer durables production occurs in Delhi and Uttarakhand in the north, West Bengal in the east,
Tamil Nadu in the south, and Maharashtra and Gujarat in the west.
Imports and Exports
India imports televisions, refrigerators, and air conditioners mainly from China and Southeast Asia. India also imports
from Japan, Indonesia, Malaysia, and Taiwan. Top component imports include compressors, evaporator coils,
condenser coils, air conditioning and refrigerator chemicals (refrigerants), motors, LCD or LED panels,
semiconductors, and electronic components.
Indias consumer durables exports include refrigerators and refrigerating equipment compressors, color TVs, air
conditioner parts and compressors, and fully automatic washing machines. The U.A.E. is a major export location. The
majority of white goods are exported to the South Asian Association for Regional Cooperation (SAARC) nations,
countries which border India.
Some top domestic companies in India and their products include:
Blue Star central air conditioners, room air conditioners, commercial refrigerators, cold storages, and
specialty cooling products such as process chillers and mortuary chambers
Godrej Group refrigerators, air conditioners, washing machines, DVD players, microwave ovens, audio-
visual products, and digital-imaging products
Onida Electronics televisions, washing machines, air conditioners, microwave ovens, and mobile phones
Videocon Industries Limited televisions, DVD players, microwave ovens, refrigerators, washing
machines, air conditioners, and power backup
Top foreign companies active in Indias consumer durables sector include:
Whirlpool Corporation (U.S.) home appliances such as refrigerators, washing machines, microwave
ovens, water purifiers, and power backup
LG Electronics (South Korea) televisions, audio-visual solutions, computers, mobile phones, refrigerators,
washing machines, microwave ovens, air conditioners, and vacuum cleaners
Samsung Group (South Korea) mobile phones, digital cameras, camcorders, refrigerators, air
conditioners, washing machines, and computers
Daikin Industries, Ltd. (Japan) air conditioners and cooling equipment
Sony Corporation (Japan) televisions, projectors, DVD players, audio systems, digital cameras,
camcorders, and videogame products
Philips N.V. (Netherlands) televisions, home theater systems, DVD players, audio products, computers,
and phones

Challenges, Opportunities for Indias Consumer Durables

The consumer durables sector in India is one that will be passing through some very interesting times. On the one
hand there is substantial scope for expansion as the favourable demographics of India are a positive for the sector.

On the other hand there are factors like increasingly expensive raw materials as well as competition that will have a
detrimental effect on the sector.

We believe the Indian consumer industry will exhibit robust 15% sales growth in 2011 and likely to maintain double
digit sales growth over medium term, was the view of a report on the Consumer Durables Industry in India released
by GEPL Capital. The lower penetration of the rural markets will be one of the drivers for growth in the CD sector. In
the urban market it will be new innovations as well as replacement demand.

But there are issues that the sector will have to face and the rising interest rate regimen is one of the first. Consumer
durables are slightly interest rate sensitive, said Dr. V.K. Vijayakumar, Investment Strategist with Geojit BNP Paribas.
So, the current high interest rate scenario means that some sluggishness in demand can be expected.

But, rising incomes have been pushing up the demand for consumer durables in India and, therefore, I will not be
surprised, if demand sustains, though at a slightly reduced rate, Vijayakumar continued.
Another factor that is going to affect the sector is competition. There is intense competition among players leading to
higher ad spends and lesser pricing power, thereby lowering margins, the GEPL note continued.

Competition in this segment is really hot now, said Vijayakumar. While market leaders in the various categories are
emerging, the other companies are finding that it is a tough going.

And the raw material scenario for the sector too is going to be problematic for the sector. Raw materials, as inputs
vary as much as there is variety in consumer durables. Some of the main inputs are natural rubber used in tyres, and
metals & polymers, which constitute the body and/or the electrical/electronic components.

With RBI hiking rates on 26th July, the eleventh time it did so since March 2010, and with no end in sight for the
tightening measures, dispensable income with the consumer would reduce to a trickle, or at best a change in
spending patterns should follow. This would mean that the ability of companies to pass on the higher raw material
prices to consumers would be considerably reduced, said Anand James, Chief Analyst, Geojit Comtrade.

Margins are shrunken due to competition and cost pressures, said Jagannadham Thunuguntla, the Head Research
at SMC Global Securities. Even technologically there are trends that are coming out of the sector. And these new
technologies are some that are defining the sector.

In categories like split air conditioners, washing machines etc. MNCs are the market leaders. Most of them have their
R&D facilities in their home countries. Therefore, naturally, they will go for technology imports to beat obsolescence,
said Vijayakumar.

In this industry, profitability is mainly a function of business volume. The industry has transformed from a high margin
low volume business to a low margin high volume business, Vijayakumar explained.

With continuous changes in the psychographic and demographic profile of the consumer, the raw materials as well as
the products are required to undergo persistent changes to meet not only the varying demand, but also to meet the
packaging and transportation needs, to improve the time and place utility of the product, as well as in product
differentiation. This would mean that consumer durable sector would continue to rely heavily on advancements in
technology, said James of Geojit Comtrade.

So from the point of view of the investors is this a good sector to invest? For conservative investors, it does make
sense, said SMCs Thunuguntla.

Since the industry is likely to do well for many more years to come, investing in stocks in the industry, when the prices
correct would be a good idea, said Vijayakumar. He cites Indias domestic consumption story for that. A catch here
is that many good companies, like the Korean majors, are not listed, Geojit BNP Paribas Vijayakumar concluded.