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INDUSTRY ANALYSIS FOCUSING ON BPL WASHING MACHINE

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INDUSTRY ANALYSIS FOCUSING ON BPL WASHING MACHINE
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INDUSTRY ANALYSIS FOCUSING ON BPL WASHING MACHINE - June 15th, 2008

EXECUTIVE SUMMARY


As per ASCON (Association Council of Confederation of Indian Industry) the washing machine production for FY00 increased by 2.5% while sales rose by 2%. The washing machine market consists of two brand segments – semi – automatic and fully automatic .The semi – automatics, that started selling and growing in the late 1980s still sell the largest .accounting for around 80% of the total market. This has been due to a variety of factors, price being one of them. The semi-automatic varieties are in the range of Rs 4000 to Rs 8000 ,the fully automatic are in the range of Rs 13000 to Rs 18000 and the new generations fuzzy logic machines come from above Rs 18000.Moreover ,fully automatic machines require continuous water supply (for each wash cycle, the water is changed 2-3 times).Most Indian cities have been facing a problem of scarcity of water.


In India (just as in the US) , top – loading machines (technically referred to as vertical or V-axis ) account for 94% of all machine sales (in the US ,it is 98% ) .Unlike Europe where front – loading (H – axis) machines dominate .Problems with bending, water leakage and child safety concerns work against H –axis machines. The top – loading segments sales accounted for almost 80% of the market in1999.However,the industry experts feel that front – loaders are the future .They are environment – friendly because they consume less water .This USP however may take a while to catch on.

Companies like Videocon are planning to launch low –priced front –loading models. While Videocon is introducing a front – loader priced at Rs 17,900 .BPL is poised to enter the segment too. And a slew of others like Whirlpool, IFB and Electrolux are well Entrenched at various price – points. From around 0.45mm units in FY 94,sales rose to 1.03mm units in FY96 ,a compounded annual growth rate of 51% .In FY 97 ,the demand lagged in line with the slowdown in the economy .In FY 98 ,only around 0.95mn units are sold .However ,FY 99 saw a reversal in fortunes with sales rising by a substantial 17% to stand at approximately 1.12mn units.

In recent times ,it is the fully automatic segment ,which is getting the attention in terms of product launches and advertising. Most companies are optimistic of the growth in this segment. By 2005 , its share is slated to rise to 70%from the present 30% .Demographically ,west and south are major markets for fully automatics while north is for the semi – automatics category. Trends have also indicated a shift from 3 -4 kg capacity machines to large ones .The 5 kg model would remain the largest selling category .The semi –automatic are more likely to be purchased by first –time buyers while fully automatics and larger sized machines would be bought more by replacements buyers .The washing machine segment has been witnessing a lot of activity of late with many new entrants

making their foray into this segment. Today the consumer has a choice of 17 odd brands and over 90 models to choose from. Intense competition has reduced prices considerably, the consequent squeeze on margins of on top of declining volumes has added to the woes of the players in this segment .MNCs ,after initially targeting the top end of the market (as only 5kg and above capacity machines were allowed to be imported ),have realized that volumes still lie in the semi-automatic segment .Hence ,they are busy reworking their strategies .Samsung, LG and new challenges for these players .This segment is extremely price sensitive and here local players definitely have an edge.
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