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issue: November 2004 APPLIANCE Magazine

New Delhi Report
FTAs Put Appliance OEMs in a Quandary


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by Adite Chatterjee, New Delhi correspondent, APPLIANCE magazine

The Indian government has signed Free Trade Agreements (FTAs) with some countries in South East Asia.

The FTAs envisage a zero import duty regime for products over a period of time. Industry executives are worried that the FTAs will force domestic and multinational appliance makers with a presence in India to rethink their expansion plans. One of the implications is that countries with excess capacity for high-tech products such as DVD drives, LCD terminals, and semiconductors may direct their products to the Indian market, which would then put pressure on profit margins of products being manufactured in India.

Companies that don’t have economies of scale would be badly hit in such a scenario. While multinationals such as LG and Samsung, which have a large presence in India, would be well-equipped to handle the increased competition, it is feared that several new entrants such as Haier and TCL, which are planning to invest in manufacturing facilities in India, may begin to have second thoughts. It will become easier for multinationals to import fully assembled products into India if the FTAs do not specifically restrict such imports. Another cause for worry for appliance makers is that it might encourage dumping of products in the high end of the market.

On the other hand, imports might just give a much-needed fillip to the high-end market and shake the Indian majors out of their complacency. There is nothing like a little competition to whet consumer appetites and add to the excitement in the consumer market.

 

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