Like many salesmen, Mohammad Rasheed working in a leading wholesale outlet in Saddar, Karachi, is highly worried about the massive plunge in his commission which he used to get on the brisk sales of home appliances a year back.

Steep rise in prices coupled with unbearable power bills in the past 1.5 years have kept away appliance consumers. A few years back, buyers used to throng the markets in March and April, especially to purchase air conditioners, but this time, the market lacks their footfall.

“I was easily earning Rs8,000-10,000 a day as a commission on selling fridges, air conditioners, deep freezers and other small appliances. Now I hardly get Rs2,000-3,500 a day due to the absence of buyers, especially of air conditioners during the summer season,” he said.

The situation is the same for fridges and deep freezers since skyrocketing rates coupled with high food inflation and utility bills have combined to hit the sales of these gadgets.

A gap of Rs5,000-10,000 in big appliances exists between the wholesale and retail rates. Salesmen pocket profit margins from the ‘new customers’ while they show some resilience for ‘old buyers’.

The home appliance industry has witnessed layoffs of direct and indirect jobs of around 10,000 workers due to depressed sales and a shortage of imported parts

For dowry purposes, he said people arrive in the market with Rs100,000-150,000 in their pockets to take away a small six cubic ft fridge, 32-inch LED, juicer/blender, washing machine, iron etc. After hearing the prices, they prefer to walk away.

A six cubic ft fridge double door now costs Rs50,000-55,000 as compared to Rs25,000-30,000 two years back, while a single tub washing machine now sells at Rs20,000-24,000 as against Rs12,000-15,000.

“Only filthy rich people can afford dowry items or cooling gadgets as their prices have gone beyond affordability for many middle and lower middle group people,” Mr Rasheed said.

A Lahore-based domestic appliances maker, who wished not to be named, estimates that the sale of air conditioners is down by 40 per cent due to high prices and power tariffs.

Weather also plays a crucial role in AC sales, as the provinces have different sales dynamics. In urban areas, people try to skip the purchase of ACs if the weather remains pleasant, even in May and June. Hot, dry and humid weather propels sales. However, this year is different, as price factors and shrinking purchasing power have taken their toll on the sales of AC and other items.

The industry is still disturbed over the restriction on opening letters of credit for importing parts and accessories. In addition to dwindling demand, production at one of the units in Karachi has been suspended for the last six months, while two factories in Lahore are feeding the market demand, he added.

The home appliance industry has also witnessed lay off of direct and indirect jobs of around 10,000 workers due to depressed sales and a shortage of imported parts.

The assembler said that declining sales of appliances have hit future investment plans to localise 60-70 parts in the next three to four years from the current 40pc.

Assemblers usually gear up production activities a few months earlier to maintain smooth supply from March to August, besides analysing unsold stocks of last year in the market. However, the declining trend in production during 9MFY23 paints a gloomy picture.

As per large-scale manufacturing data, fridges and air conditioners production fell to 723,868 and 245,354 units in July-March FY23 from 1.027 million units and 400,333 units, respectively, in the same period last fiscal year.

President of Karachi Electronic Dealers Association (KEDA), Mohammad Rizwan Irfan, said: “Only 30-40pc of work in home appliances has been going on compared to last year as consumers are unable to pay hefty prices and high power tariff.”

As demand for deep freezers usually rises on Eid ul Azha, he added, “I do not think that buyers will turn up in larger numbers due to high prices and high cost of living. Much will depend on the sales volume of sacrificial animals this year compared to last year.”

Due to the cash crisis, people prefer to repair their home appliances instead of purchasing new goods, he said.

Mr Irfan said appliance prices have risen due to the rupee devaluation against the dollar, which means that the private sector is only assembling rather than manufacturing, depending on the arrival of imported parts.

In ACs, he observed that people purchase one tonne instead of 1.5 tonnes due to the price factor and to make rooms a bit cooler to beat the heat besides running it for a limited time given soaring power bills.

Consumer Price Index for May 2023 clocked in at 38pc year on year and 1.6pc month-on-month. Arif Habib Limited states this is the highest year-on-year inflation since the available data, ie July 1965.

Sales of Waves home appliances soared to Rs8.8 billion in 2022 from Rs 2.425bn in 2021, while profit surged to Rs48m from Rs37m. However, sales and profit during January-March 2023 came down to Rs1.381bn and Rs11.2m from Rs 3.382bn and Rs93m in the same period last fiscal.

The revenue of the appliances division of Pak Elektron Limited (PEL) has nosedived to Rs4.4bn in January-March 2023 from 9.940bn in the same period last fiscal year due to sustained pressure on the demand side. PEL said demand is curbed by the prevailing recessionary regime hitting purchasing power and product cost hikes due to weakening local currency, global commodity price hikes and growing inflation. On the supply side, the company observed low-level operations due to a scarcity of imported inputs as a result of import restrictions by the State Bank.

Published in Dawn, The Business and Finance Weekly, June 5th, 2023