“While business may proceed as usual, Xiaomi phone prices may see an increase due to the recent hike in GST rates”
The coronavirus pandemic will not significantly impact business in India for Xiaomi, according to the company’s India CCO, Muralikrishnan C. According to a report published on IANS, the executive has affirmed that despite the supply crisis faced by the company in China due to shortage of components available and factories being shut, Xiaomi’s smartphone business may remain largely unaffected in India due to “exceptional job” done by Xiaomi’s supply chain partners. This can be a critical factor since Xiaomi is India’s largest smartphone OEM, and a sizeable part of its global smartphone sales are due to its stronghold in the Indian smartphone space.
However, while the company maintains that the viral outbreak will not impact its business in India, the recently announced hike in GST rate is very likely to affect the brand in the long run. After the GST Council announced that mobile phones will now be taxed at 18 percent instead of 12 percent, Xiaomi’s India managing director and global vice president, Manu Kumar Jain, took to Twitter to state, “GST increase for phones from 12pc to 18pc will crumble the industry. (The) smartphone industry is already struggling with profitability due to depreciating INR vs US dollar. Everyone will be forced to increase prices. This will further weaken mobile industry’s Make in India programme.“
My humble request to Hon. PM @NarendraModi ji and FM @nsitharaman ji – please reconsider this #GST hike.🙏
— Manu Kumar Jain (@manukumarjain) March 14, 2020
The industry is already struggling with depreciating INR & supply chain disruption due to Covid-19.
At least all devices under $200 (=₹15,000) must be exempted from this. https://t.co/hOMpSpTyKk
He further made an appeal to Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman via Twitter to reconsider the tax hike decision, stating, “The industry is already struggling with depreciating INR and supply chain disruption due to Covid-19. At least all devices under $200 (~Rs 15,000) must be exempted from this.” Jain’s statements on the matter suggest that while Xiaomi may have some inventory in place for smartphones to continue normal-scale sales, if the disruption period becomes longer, it will create a double whammy for the company in India, where alongside supply crunch, the tax hike will likely force companies into increase smartphone prices.
While the company has been launching phones in regular intervals like the recently launched Redmi Note 9 Pro series, Xiaomi’s LED television range, which is also fairly popular in India, has reportedly faced the coronavirus impact already due to constricted supply from China. While Xiaomi’s smartphones sold in India are assembled locally, the televisions are assembled and imported from abroad. With factories remaining in lockdown in multiple parts of China, the TV business is already taking a hit from it. What now remains to be seen is how long can Xiaomi resist the coronavirus impact on its business in India and other nations, before it makes a significant dent in its typical sales figures.
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