White goods sector leaves tough year behind with mixed hopes

Following severe stagnation in the sector in the first quarter of 2009 -- a 25 percent drop over the same period of 2008 -- the economy administration understood it was high time it rolled up its sleeves and introduce a stimulus package. Coming on the heels of such a discouraging atmosphere, the private consumption tax (ÖTV) on white goods was reduced to 0 percent from the previous 6.7 percent on March 15 and stayed in place until June 15 in a bid to help the sector withstand the effects of the crisis. Revised for a second time in June, the ÖTV was set at 2 percent through the end of September.

The white goods market managed to recover a little thanks to the tax cuts and extra promotions introduced by producers. Customers saw discounts of as much as 30 percent compared to the pre-incentive period, an incentive that led many to flock to white goods stores. A recent survey by GfK Turkey, a leading market research agency, showed the incentives produced a 9 percent growth in production in the white goods sector and an 18 percent increase in sector revenues during the March-June period of this year compared to the same period of last year.

Recent tax reductions might have offered a sanctuary to the ailing sector; however, problems still prevail in the market. Some companies, particularly those from the supply industry, had no alternative but to dismiss employees as tax reductions expired, leading to a serious decline in business. Now that the incentives are gone, the sector is again left unprotected and recuperation as seen during the incentive period seems difficult to come by, though not impossible.

Having left a tough year behind, amidst heavy declines in both production and sales compared to 2008, the Turkish white goods industry has pinned its hopes for 2010 on incentives for energy-saving products in anticipation of an exit from problems that continue to plague the market. Seeing the potential in a growing energy-saving, or A-class, products market, leading producers in the sector suggest that it is possible to enjoy a similar rejuvenation as in the incentive period again with some tax incentives for energy-saving products.

In this regard the government in recent months initiated a study to reduce the ÖTV, currently at 6.7 percent, on these products; however, no progress has yet been made. In separate comments on the issue last week, White Goods Industrialists Union (BESD) President Rıfat Öztaşkın said they conveyed their suggestions to the government regarding a tax cut in energy-saving appliances and expect a response soon. White Goods Suppliers Association (BEYSAD) head Murat Önay said they are hopeful about a recovery in the sector should the government introduce the anticipated incentives.

Remarkable potential, bright future

A-class white goods products could save as much as 90 percent of energy used when compared to ordinary appliances. Considering the recent consecutive price increases in electricity and water usage, customers have begun to pay attention to whether the goods they are purchasing save water or energy more than before. Not to mention that global warming and alternative energy resources have begun to gain more importance, the A-class appliances market offers a bright future for producers.

According to a report by home appliances manufacturer Electrolux, İstanbul could save as much as 21 billion liters of water per year if people switched from hand washing dishes to efficient dishwashers while this number is 150 billion liters for the entire country.

According to Vestel executive board manager Ömer Yüngül, switching to energy-saving white goods is as important as building dams. A survey has shown that the only appliance in the Turkish white goods market that was not negatively affected by the global financial crisis was the dishwasher, a clear indication of increasing interest in A-class appliances, he said. The share of A-class white goods in overall white goods sales increased from 65.8 percent in the first six months of 2008 to 69.1 percent in the same period of this year.

Vestel executive board member Levent Hatay told Today’s Zaman that producers should increase their investment in research and development (R&D). Recalling that Turkey increased white goods exports in the January-October period of this year, he said the country has the potential to become a production hub in its region. As the white goods industry goes through a swift change due to breathtaking technological developments, Hatay noted, their company expects to invest some $120 million in R&D and marketing in 2010.

According to Yüngül, consolidations between some companies in the white goods industry will be unavoidable in 2010 because companies, working on their own, are losing ground. “Those suffering serious financial problems will seek ways to work together with relatively stronger companies,” he said. Considering that nine white goods suppliers closed their doors in 2009 and a few others have already started dismissing employees, particularly after the end of the tax cuts, the possibility of consolidations is high in the market.