Impact of Covid-19 on electrical, lighting and appliances industry

2020-04-30

IoTfy recently organized a webinar titled: “Impact of Covid-19 on electrical, lighting and appliances industry.” Arpit Chhabra, CEO, IoTfy, said that we will need simple products in the future that are easier to set up and use.

Impact at large
Dinesh Aggarwal, Joint MD, Panasonic Life Solutions, said the current situation is going to be a mixed bag for the electrical industry. There are certain essential products, such as fans and lighting. We have to move cautiously. There are other products such as house wires and switchgears.

We have also reached a DIY situation. When the market re-opens, the first product to go would be essentials. There are migrant workers as well, and we need to address them as well. It will take time for them to return to work. We also need to look at support.

Rakesh Zutshi, MD, Halonix Technologies, added that Covid-19 is a Black Swan event. We have to give life a priority now. The biggest customers would be the government, who are almost broke. Essentials may still be sold, but the others may not be. This situation will have an impact on every organization.

Capex will be delayed, till the time the cash cycle is stabilized. Spending will definitely get dampened in the short run. While India is a big market, China has been caught smack with lack of demand from the USA and Europe. We will also need skilled and semi-skilled employees to help consumers install products in their homes.

Sachin Motwani, Director, Osum and Cona Industries, said that we are on a complete shutdown. So far, electricity is not part of the essentials. We need to look at how do we get back. Everyone has been impacted financially. There are companies spending on labour contract. We need to take care of that.

In the immediate future, DIY products will be more in demand. Each and every family member may be fighting for the plug point. It will take a while for us to get back on track. We also need to be ready ourselves to get back to track. We have to get a safe environment for all of our workers. Our segment is also labour intensive. Most of the labourers are scared, and may have left for their homes. We will have a challenge in getting them back.

New normal post lockdown
According to Zutshi, demand itself will be a challenge. The estimation of demand will be key. China has a 60-day lead time. Today, we are at the end of April. As the cash cycle improves, it may help. Getting cash flowing across the chain will be another big challenge in the near future. State governments are currently not getting funded. We need to find a way to get out of this lock jam. Cash cycle should be made to get back on track inside three months.

Aggarwal added that all of us are professional employees. We have been paid all through. However, we need to look at the labourer, and the retailer. How are they going to get paid? The whole industry will look to kickstart. We need to get such people compensated so that they can return to work as well.

There is also the Rs. vs $ dollar challenge. Most manufacturers would have some opening inventories. We have these inventories that will help us ride the opening situation for 20-30 days, depending on the manufacturers. We will also support the small-scale vendors and ensure the supply chain starts. In the short run, the demand can come back only if we have installers and electricians returning to work. All manufacturers have to become more supportive. Suppliers may not be cash rich immediately.

Motwani noted that cash flow will be a major issue. Companies can only pump in a little bit of their own capital. We can get cash only when retailers start selling. How good will be their cash flow? As a company, we need to pump in more money, and also look for help from the government. We have a challenge to face with starting the actual production in the factories.

Roadmap ahead
Motwani felt we need a substitute and a separate ecosystem immediately. The electronic components ecosystem in India is very poor right now. This is the right time that the various companies can collaborate and help the economy. India is the largest LED consuming country in the world. Manufacturing in India would need a lot of components. Companies must collaborate. If the other countries are looking at India, we can also look at this opportunity to kickstart manufacturing.

Aggarwal said that right now, localization looks impossible. It can happen over time. Two businesses – lighting and solar – are dependent on China. We get most of our requirements from China. We need to have grounds up manufacturing of solar cells. The Indian government should also make LED manufacturing key for India. We can start reducing dependence on China for LEDs.

India’s LED capacity is very low. We need to take steps to make slabs of import tariffs, for finished and imported products and components. We have excellent die casting capacities in India. We need to ensure we have better tariffs. This will also help the domestic industry to build up capacity.  We are largely domestic-focused company.  Our experience in lighting products has been very good. We have to expand our horizons.

Zuthshi noted that localization will probably get some speed. Electronics and manufacturing will see top priority now. India will probably look at developing a local electronics manufacturing ecosystem and supply chain.

Future trends on IoT
Zutshi added that at an IoT level, we are going to see a challenging time. The uptake of WiFi-enabled and voice-enabled devices will probably bear the brunt. There is a remote element to everything today. People will invest in creating capabilities that can address their assets remotely. Those can be people, manufacturing, goods, etc. IoT needs to do a kind of the reset.

Aggarwal said that technology adoption will be a challenge for some. Lot of people have been exposed to various technologies in the lockdown period. This is a positive indicator. People are not yet aware what IoT products can do for their lives.

IoT products should be more easier to adopt and make them useful. The general awareness regarding IoT will increase significantly post lockdown. We will look at new products that take care of hygiene and safety will do well. Automation products could also do well now.

Motwani said that anything that makes our life easier will be in demand. There are IoT products that will be for the niche or upper class markets. However, new products with simple usage will take form and shape now, that will help us personally, and in our business. The new products released have to be very easy to use.

Actions taken by the government
Zutshi said that the government needs to get the cash cycle going at the earliest. Once the wheels are in motion, things will fall in place. Everything goes on from there — employment, production and consumption. As we get interconnected, we should be also very careful about privacy and data. We need to put our minds to robustness and policy making. There should be some regulation the data and where it is stored.

According to Aggarwal, all the technical infrastructure projects that were held up should be started at the earliest. There should be caution exercised. Developers need to be given some short-term credit to get things started. Some financial help for construction workers, electricians, and other such people is also needed. We should take care of the vulnerability of cloud security. In construction, commercial and godowns, only the projects in the advanced stages will initially go through. There will be some delay in plans as to how will everything pan out.

As per Motwani, the government should show strength and commitment, and come up with clear guidelines on the way forward. There is need to remove fear from those who are the uneducated. There should be some long-term credit to small businesses as well, although, it may not be for everyone. Micro finance will play a big role to kickstart the economy.

Key highlights/inferences drawn from the panel

More focus on localization expected
* Localization is very important to avoid supply chain disruptions in the future.
* Countries are looking at India as a substitute for China.
* India to have a local manufacturing ecosystem (from assemblers to manufacturers) in the Covid-19 aftermath.

Trends expected to emerge post the lockdown
* People having a fear of touching the open surfaces will lead to an increase in demand in smart products (E.g.- People using toothpicks to summon the lifts in complexes).
* People will invest in IoT-enables devices/appliances to avoid making physical contact with them.
* The IoT industry in India is expected to witness a boost.
* Tech products that make it easy for people to operate from their homes, will get a boost.
* Chip-based IoT products will see a major spike.
* DIY products will see huge demand (E.g. extension cords, multi plugs).

Actions needed from the Government
* Keep the cash cycle running to reduce job losses.
* Free or long-term credits should be provided to MSMEs.
* Get the infrastructure segment going.

Challenges expected ahead
* The challenge that the electronics industry will face is getting the labor back to their respective workplaces because most of them have traveled back to their respective villages.
* Getting the demand back will be the biggest challenge without the workforce.

Reference: DATAQUEST