NEW DELHI: Indian handset makers are facing a double whammy with the loss of an inexpensive avenue of credit and the disruption caused by Reliance Retail’s JioPhone, forcing them to cut production of feature phones and risk losing further ground to Chinese rivals.
Funding costs shot up after the Reserve Bank of India scrapped letters of undertaking (LoUs) in the wake of the PNB scam earlier this year, which may lead to higher mobile phone prices. Experts said this and the production cut could result in domestic handset makers such as Lava, Micromax and Karbonn ceding further market share to rivals, mainly Chinese companies.
“In LoU funding, the industry used to get finance at rates between 2.5% and 3%. Now, for the same, we have to use our credit limits and that will come to 10-12%.
It is an 8% (percentage point) jump on the price,” said Ritesh Suneja, group chief financial officer of Lava International, a view backed by Karbonn Mobiles chairman Pardeep Jain.