The home appliances business is thriving and key market players expect consumer demand to surge as households generally replace their old appliances with newer models.

According to an assessment, almost all concrete houses in first-, second- and third-tier cities, from posh areas to shanty settlements, have fans. The reach of the television is said to be as high as 80pc. In major cities, almost 60pc of households are said to have fridges and washing machines, on average.

And China is reaping the benefit of the changing lifestyle in Pakistan, as the bulk of key components used in home appliances are imported from the Asian giant, leading companies in the business confirmed.

‘It is the lack of an electronics ecosystem in the country that forces companies to import parts. We are in the business for the margins. If imports are both hassle-free and cheap, why should we produce locally?’

Private sector representatives shared their vision and strategy, but avoided discussion about their business models.

They sidetracked talk over the size, volume and nature of their trading arrangements with their overseas partners.

The government had no clue either, except for two lines in the latest Pakistan Economic Survey’s chapter on manufacturing and mining, routine customs data, and monthly production data released by the Pakistan Bureau of Statistics (PBS). The stakeholders believe the official data show only the tip of the iceberg.

According to the Survey, “In electronic products, air conditioners, deep freezers, electric motors, storage batteries and refrigerators were main contributors (to LSM), growing by 36.12pc, 83.03pc, 20.1pc, 3.2pc and 3.6pc respectively”.

Officials in the federal ministry of industries and the Pakistan Engineering Board, when reached over phone in Islamabad, admitted that the growing home appliances sector has not been properly monitored.

The response of Raja Hasan Abbas, the federal industries secretary, was disturbing. “Since I assumed office about eight months back, the sector has never come up for discussion at any forum. I am also unaware of a case where the ministry was approached by a home appliance maker. I am, therefore, not in a position to project the actual size of the home appliances market off hand. Yes, it is big and expanding, but how big or at what rate it is expanding is hard to tell,” he candidly said over phone.

“Retail audit is not there. No structured research on the sector is available, so it is not possible to quantify the size of the market,” said Hasan Jamil, GM Sales at the Dawlance Group of Companies, when reached over phone.

The Federal Board of Revenue (FBR), however, is fairly comfortable with its role in the sector, both at the production and import stages.

FBR Chairman Tariq Bajwa told Dawn that the authority does not operate at the retail stage, but a system has been developed to levy tax at the production end. He said the data of customs duty on electronic items is available with the member, customs.

“Our mandate is limited to implementing taxation measures, and we are doing that fairly well. The big electronic items are too sophisticated and produced or imported by big companies such as Dawlance, Haier, Pel, LG, Samsung etc, which are in the tax net,” he said.

But he had no ready answer about the gap between the PBS’ production figures and the visible sale and penetration of appliances in average households.

Market players active in the sector hinted at the existence of a huge informal sector that is instrumental in creating depth in this segment. They also suggested at wide scale smuggling of compressors, condensers and motors under the garb of scrap imports.

“Look at the price range. Look at the growing numbers of appliance sales points and markets. If someone cares to watch, it is not difficult to segregate the sector into consumer electronics (TV, audio systems etc) and consumer appliances (fridge, ACs, washing machines, microwaves etc) and identify the drivers of demand, and the size and trends in major products,” the CEO of a leading company said anonymously.

Visits to a few bustling electronic markets confirmed the wide price range in virtually every product category. The choice range for consumers of all income categories is fairly big, as cheaper reconditioned products are available alongside new ones.

Retailers told this scribe that the stiff competition takes care of the price. “This year, we are hoping for very busy months ahead as prices are stable and the customer rush is more than before,” Rashid, a salesman at a major outlet in Saddar, Karachi, told this scribe.

Talking about the demand drivers, Jamil hinted at societal transformation and changing economic aspirations of families.

“It is a combination of awareness and affordability of families that has sustained and increased the demand. The Pakistani middle class, like its counterparts elsewhere, like to replace their appliances with new and more advanced versions.”

He believed that there are about 2,000-2,500 electronic products’ markets currently in the country.

When asked why growth in the industry has failed to nudge it towards indigenisation — as currently it is more of an assembling industry with 60 imported components — the CEO of another leading company said: “It is the lack of an electronics ecosystem in the country that forces companies to import parts. We are in the business for the margins. If imports are both hassle-free and cheap, why should we produce locally?”

Eijaz Ahmed, director of the Engineering Development Board, was not able to provide details about the sector within the deadline for this article. He agreed that the sector deserves more attention than currently being afforded by the government.

According to latest PBS figures released on March 24, the production of home appliances — including refrigerators, TV sets, air conditioners and sewing machines — rose 10pc to 1.2m units during July-January 2014-15. The production of the most popular products — fridges and deep freezers — was up 15pc to 0.8m units, against 0.7m units during the same period of the previous year.

And the production of television sets — the second most popular category in electronic goods — grew 5pc to 57,000 units during July-January. But air conditioner and sewing machines declined 6pc and 1pc over the period.

Published in Dawn, Economic & Business, April 6th, 2015

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