Rising income eats into replacement cycle of home electronic appliances

Written by Neha Pal | New Delhi | Updated: Sep 30 2009, 05:57am hrs
Rising incomes and evolving lifestyles have reduced the replacement cycle of the electronics and appliances industry, according to a joint report by Ernst & Young and Assocham. The replacement cycle, nearly nine years for televisions and 12 years for domestic appliances, has come down by approximately 4-5 years for televisions and 7-8 years for domestic appliances. The chances of owning a second television and air conditioner within a single household have also increased.

Credit purchases account for nearly 20% of the overall consumer appliances sales and this has underscored growth in the consumer appliances industry. The report further points that a faster rate of obsolescence in technology is bringing down the prices of products and making them affordable to lower income groups. This trend has been seen largely in the case of colour televisions, mobile phones and DVDs.

The report also says that nearly 10 million households are estimated to have income levels above $10,000 per annum. With the implementation of the Sixth Pay Commission, the salaries of Central government employees have been revised by an average of 21%, providing nearly 5 million government employees with an additional spend of $3.7 billion for FY08. Apart from this, with a growth of 20% in per capita income, this segment offers various opportunities for luxury products.

According to Assocham, the electronics and appliances industry constitutes both household and industrial segments, of which significant market potential lies in the former. The consumer appliances market in India is worth $4.34 billion, with imports valued at $1.22 billion and negligible exports of $0.36 billion.

Air conditioners, including industrial and office air conditioners, constitute around 38% of the consumer appliances market size, followed by refrigerators at 14%. Electric fans constitute 7.5%, sewing machines 5% and washing appliances 7%, of the appliances market. Majority of the imports are finished goods such as watches, electric coffee mills, food grinders, sewing machines, aluminium pressure cookers and electric heaters.

The report further says that in order to boost the electronics and appliances industry, the size of the domestic market needs to be increased. A balanced strategy of promoting both domestic and export promotion should be adopted for the growth of the industry. There is also a need to innovate and introduce products at penetration pricing for households in the lower-income levels. The report also adds that innovation should be promoted through investments in research and development.