In the past one month, the price of the Dollar has gone up against the Indian Rupee by as much as 10 per cent. While earlier every Dollar used to cost Rs 45 (approximately), now it costs close to Rs 50. This means that buying in China (which almost all Indian brands do) has become costlier by 10 percent. Hence, Indian brands are forced to increase the price of their products.
“Despite the continuous fall of Indian Rupee against US Dollar in the past few months, Karbonn has absorbed the burden but now it is increasingly becoming difficult to retain same price levels. In addition different states across India are levying different VAT rates for mobile phones, which is also eventually a price burden on the consumer. Karbonn will be increasing the prices in the range of 7-10 per cent basis for the competitive positioning of various models,” said Shashin Devsare, executive director, Karbonn Mobiles to The Mobile Indian.
Even Chinese players are facing the heat. One of the major Chinese players, which has big plans for India, recently deferred its launch plans for a tablet. After confirming the price of the tablet to be launched, the company’s spokesperson asked us to make a correction in the launch announcement, and he attributed the change of plan to the fall of the Rupee against the Dollar.
Meanwhile, some other players are tweaking their products by reducing the specification of their devices to absorb the price difference. Beetel reduced the specification of its recently launched Beetel Magiq tablet. It will now come with a 768 MHz processor compared to the 1 GHz processor in the earlier version. The company also ditched Internal Memory in favour of external memory. This in fact helped them reduce the overall cost by Rs 200; whereas it could have been a much greater reduction had it not been for the Rupee’s fall.
MNC brands like Nokia, Samsung and Motorola are also facing the heat as even they import most of their products. However, they have the ability to absorb this fall in the Rupee’s value as they work with higher value products which anyway become cheaper as they grow old.
However, the reduction in price will not be as much as it used to be. Typically a smartphone launched for Rs 30,000 usually costs Rs 24,000 after six months. But, in today’s condition the same smartphone’s price would only come down to Rs 27,000. This happened in the case of Sony Ericsson Xperia Play and Arc, Samsung Galaxy SII etc.
In case of low end products, the cost of technology is negligible so there is little space to absorb this hike in procurement costs. Players like Nokia, Samsung and LG have manufacturing bases in India itself where they primarily manufacture basic mobile phones and therefore are less affected by the Rupee’s valuation even though they import most of the components that go into the phones being manufactured here.
This situation is in fact leading to an increase in focus on Indian manufacturing and the new telecom policy, which has stressed on Indian manufacturing, we might well see a spurt in manufacturing in the country.