Smartphone brands expect 3% rise in shipments on tax relief for middle class

Market experts said shipments, particularly in the entry-level segment, could rise by as much as 3%.

“Multiple drivers, including income tax relief for the middle class and the recently announced Rs 10 lakh-crore government capex allocation will spur growth in consumption demand and industrial growth across sectors,” said Muralikrishnan B, president, Xiaomi India.

The government has revised income tax slabs under the new regime for FY24, proposing that income eligible for rebate be increased from Rs 5 lakh to Rs 7 lakh per annum, and the maximum surcharge be reduced for the highest income brackets.

There is also the added benefit of a standard deduction that earlier wasn’t allowed in the new tax regime, potentially leaving middle-class taxpayers with higher disposable cash.

“The proposed new rates will provide liberation to all taxpayers and extra savings will spur growth in smartphone sales,” said Sanmeet Singh Kochhar, VP, India and MENA, HMD Global.

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Demand CrunchSome market trackers, though, remain wary of demand revival, an issue that has plagued the industry since Q2, 2022, and is expected to persist until the first half of this year.

“Since there is already a fear of a global recession and likelihood of further price increases, I think that savings will go into absorbing increases in the cost of living,” said Faisal Kawoosa, chief analyst, TechArc.

He added that without more affordability options to the consumer, the entry-level segment will still face low demand. “We are focusing more on exports, local production, but we are not looking at how we can generate more demand in the devices segment where there is still potential.”

Tarun Pathak, research director at Counterpoint, however, expects the tax rebate to drive 2-3% growth for the smartphone industry.

The entry-tier segment has been the most impacted from low demand, even as the premium one grew in double digits, Pathak said. The income slabs that have been offered relief correlates directly to the entry-tier, where there could be growth in volumes, he added.

Earlier, the segment under Rs 10,000 a unit garnered 33% of the volumes, but fell to 28% in 2022. “With the income tax relief, we may see a net addition of 7-8 million units in that segment,” said Pathak.

IDC India’s Navkendar Singh expects the tax relief to revive demand to some extent, but remains skeptical of higher prices this year which may have no effect on upgrade cycles. “Since there’s not much action in the sub-Rs 15,000 segment, consumers are anyway forced to buy higher priced devices,” he said.