This is the second time this year that companies have cut production. After the first cut in April-July, production has normalized and even grown year-on-year from August to the festive season in early October, industry executives said.
In terms of smartphones, market analyst Counterpoint estimated that sales fell 35% year-on-year in November, with the entry-level segment seeing a decline of more than 50%. According to industry estimates, home appliances and electronics saw a 15-20% year-on-year decline in sales last month.
“Due to the steep decline in post-Diwali demand, companies are reducing production, and the entry segment has been hit the hardest. For example, 32-inch TVs contributed 50% of total sales last year, but have now declined to 35%. Same is the story for mobile phones,” he said, retailing his own Carbon brand. Besides, said Pradeep Jain, Managing Director of Jaina Group, which manufactures smartphones and electronics for several brands.
Deepak Bansal, vice-president of LG Electronics India, said market sentiment was dampened by fears of inflation and layoffs in the technology sector and a slowdown affecting earnings. This has forced the industry to curtail production, but a recovery is expected early next year due to factors such as inflation and an increase in seasonal sales, he said.
Every year demand drops after Diwali, but this year is the worst in 5-6 years, with even major trading partners refusing to take stock, industry executives said.
Tarun Pathak, director of research at Counterpoint Research, said the lack of new releases in November led to a sharp decline in sales. Brands’ unsold inventory is close to eight weeks, 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 very low. This pressure will continue till the next April-June quarter. As a result, brands are adjusting production.”
The focus is now on the production of summer products like AC and deep freezer, reducing others, said Satish NS, president, Haier India. The company stopped production for 10 days after Diwali.