In 2019, and even at the beginning of 2020, Indian smartphone users were singing praises and writing laurels about smartphone brands like Xiaomi and Realme, which were offering mobile phones at unbelievably low costs. However, all that changed to a certain extent, when all the brands hiked the costs last year. While Xiaomi and Realme became popular because of their ability to offer smartphones at extremely low costs, the increase in the prices of mobile phones took the Indian consumers by surprise.
2020 was a difficult year for everyone around the world. The Coronavirus pandemic dampened any enthusiasm that persisted in the market, and brands took a major hit, especially during the months of April and May, when the effect of the virus, and the gravity of its devastation dawned on the governments around the world. Shipments came to a grinding halt, and smartphone brands had to shut shop for weeks.
We list a few reasons why smartphone brands had to hike the prices of mobile phones, especially over the past 12 months.
Increase of import duty
Late last year, the Indian government announced that it would impose 10 percent import duty on important smartphone features, including their displays and touchscreen panels. This decision was taken because of the government’s efforts to promote local manufacturing.
Given the fact that the display and the touchscreen panel of a smartphone account for around 15 to 25 percent of the entire cost of a mobile phone, it was a significant increase, resulting in smartphone brands like Xiaomi, Oppo, Vivo, Samsung, Realme, and other top brands increasing the costs of their mobile devices by as much as Rs. 500. For instance, Samsung phones under 15000 INR witnessed an increase of Rs. 500, which was also the case with smartphones from other brands.
While the increase may not seem significant or substantial, an increase of Rs. 500 for the average consumer is indeed a big deal.
Brands like Realme announced that the increase in the cost of their smartphones came about as a direct consequence of the Coronavirus pandemic, along with the fluctuating value of the Indian rupee. COVID-19 sent the global economy into a tailspin last year, and smartphone brands had to shut shop for weeks, with zero shipments. This also forced smartphone brands to recalibrate and re-evaluate, thereby increasing the price of their smartphone models. Even the cost of Samsung new mobiles were increased, as even the global juggernauts had to deal with the effects of the Coronavirus pandemic.
Hike in GST on mobile phones
In April last year, Xiaomi India’s MD Manu Kumar Jain announced that the company would be increasing the prices of their mobile phones, as the Indian government increased the GST on smartphones by as much as 50 percent, moving them to the 18 percent slab from the 12 percent slab.
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Given the fact that Xiaomi has a policy of maintaining around 5 percent margin on its hardware products, the brand had no other option but to increase costs. Other brands also faced a similar dilemma, resulting in the cost of smartphones increasing overnight.
All of the above-mentioned factors contributed to the increase of prices of smartphones in 2020, and with the pandemic still raging, one can certainly understand the plight of the smartphone brands. That said, the Chinese brands are offering newer smartphone models at attractive price points, and we might see things getting back to normal (at least relatively) in 2021.
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