Recently, as the market demand rose, the consumer durables/electrical industry became comparatively nimble. Government reforms, coupled with the increase in affordability and radical demographic shifts, broke market barriers for attracting investments from international and Indian players alike.

As the “Ease of Doing Business” index improved favourably for India, many market reports concurred the sector peaked with lucrative penetration levels from many primary brands.

But while the estimates, before the COVID-19 outbreak, indicated the ACE sector would experience a double boom and reach around Rs. 1.48 lakh crore by 2025, the current market status presents a bleak scenario desperate for policy interventions.

Primary challenges of the ACE industry

China unequivocally dominates the Indian ACE sector, with yearly imports of 40-50% entirely built units and 70% components. As a result, dedicated efforts to reduce the trade deficit will remain paramount, especially with the Make in India initiative in full force.

Moreover, the current macroeconomic environment indicates a lower household penetration level for the ACE sector, as the impact of COVID-19, unfortunately, caused a decline in consumer demand. With many affected poorly by pay cuts and lay-offs, demand recovery remains the need of the hour.

How effectively brands tap into new profit centres, in the wake of COVID-19, will be a litmus test for the ACE industry. Because, if the reports forecast accurately, India can be the new manufacturing hub for consumer durables to support the “Atmanirbhar” drive.

Growth enablers to watch out

COVID-19 disruptions have rendered traditional business models quite inept, so adoption of e-commerce will witness a welcome rise. As new modes of business uptick, they can fetch new entrants in the market and increase footprints, especially in the mobile handset segment with more consumers readily shifting to savvier products.

Moreover, since India depends heavily on China for the components of consumer durables, localised production may help eliminate the cost disparity and provide a boost to the SMEs. Supply chain localisation will also facilitate component production at lower operational and raw materials costs.

Now, as China loses global support, India has become a credible alternative for most manufacturers who want to shift base. Given the lucrative turn of tides, what better time to unlock localised production than now?

Additional Read: Benefits of a Term Loan

Future headwinds

As we advance, the ACE sector will want to differentiate the market experience to enable sustained consumption and a market boost in India. Drives for innovation and local product development will lead the sector operations if brands want to make up for the supply chain cost burden.

Besides, convenience and automation will dominate market trends. As consumers shift more towards “smart” commodities, the new consumption sentiments will also demand fresh advancements from brands – one improbable without sufficient investment in the R&D ecosystem.

Additional Read: What is the Difference between Term Loan and Working Capital Loan?

Given the case, accessibility to easy finance will be a critical enabler to the industry boom. So, brands can step up investment to harness the new trends and break into new, as well as old market verticals, with external finance.

At Tata Capital, you can avail of bespoke credit solutions to make lucrative investments and meet your revenue demands. Enjoy competitive term loan to raise required capital at minimal documentation, no hassles.

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