Festive demand on easy finance: Samsung, Vivo, Xiaomi and others stretch EMIs to 30 months, bear interest costs

Kolkata: Smartphone and consumer electronics makers are stretching equated monthly instalment (EMI) tenures to as long as 30 months this festive season-six to eight months more than usual-taking a hit on margins as they absorb the financing cost to cushion consumers from steep price increases and revive demand, especially in the mass-to-mid-level segments.

Samsung, Vivo, Realme, Xiaomi, Oppo and Nothing have done this even for entry- and mid-segment smartphones, where EMI options weren't offered to customers or were for a shorter eight to 10 months.

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This season, some brands are extending easy financing schemes to 18 months on such handsets to lessen monthly payouts and make higher-priced phones more affordable.

Countering Rising Prices

Companies are increasingly taking this route to soften the blow of regular price increases this year on consumers. Smartphone prices have gone up sharply, denting demand. Smartphone sales fell more than 12% during January to September at a time when handset prices climbed 30-35% on average, according to industry estimates.

Brands are taking the hit on margins as they bear the interest charges on no-cost EMIs and, in some cases, part of the interest on regular finance schemes.

"EMI schemes across all price tiers are the single most vital growth driver for cellphone retail this festive season," said Kailash Lakhyani, founder chairman of the All India Mobile Retailers Association (AIMRA), which represents more than 150,000 stores. "With smartphone average selling prices surging sharply this year due to repeated price hikes and newly launched models debuting at 30% to 70% higher prices across both Android and iOS ecosystems, consumer finance schemes have become ever more important."

Samsung is offering, for the first time, 30-month no-cost EMI on its foldables and S26 series, while its A series gets an 18-month no-cost EMI option. Fold and Flip models are also eligible for financing tenures of up to 40 months, according to official trade communications reviewed by ET.

Xiaomi has rolled out a mix of no-cost and low-cost EMI schemes for up to 18 months. Realme told retailers that longer-tenure schemes are win-win for everyone-lower monthly payouts for consumers, improve customer conversions for retailers and drive volumes for brands. Vivo is offering 30-month no-cost EMI on its flagship model and 24-month financing on its premium portfolio.

Televisions and appliances are also experiencing the trend of longer-tenure EMIs. Haier India has introduced a 24-month no-cost EMI scheme for its premium televisions, while Godrej Appliances is offering up to 18 months.

"The interest cost which brands bear would vary from 8-18% for no-cost EMI schemes of 8-30 months tenure," said Haier India chief executive Satish NS. "The adoption of finance reduces with higher-priced premium products. The mobile phone industry is experimenting beyond 30 months, but the interest rate is a steep 24% for such loans."

Retailers and ecommerce platforms-a crucial driver of smartphone and consumer electronics sales-expect finance-led purchases to comprise a larger share of festive sales.

Flipkart vice president (payments) Gaurav Arora said EMI schemes are currently contributing about a third of mobile, large-appliance and electronics retails. The platform expects the figure to rise to nearly half for high-value electronics purchases this festive season.

Reflecting this growing trend, the share of consumer finance in smartphone sales has risen to 42-43% this year from about 35% last year, said Tarun Pathak, research director at Counterpoint Research.

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More than 65% of premium smartphones are bought on EMIs. "Brands are looking at multiple finance schemes this year and have even rolled them out in the sub-Rs 20,000 segment, where demand has been hit the most," Pathak said.

Televisions are facing similar pressure, with smart TV shipments estimated to have declined 8% year-on-year amid a nearly 10% rise in average prices, according to Counterpoint. Brands are consequently offering finance options of 18-24 months across televisions, refrigerators and washing machines.