Weak rupee, high import tax factors behind high prices; company investing in India for long term: Apple

KOLKATA: Apple has acknowledged that the higher pricing of iPhone 6s and 6s Plus in India and some other markets due to foreign exchange fluctuations has had an impact on their sales, but said it’s investing for long term in the country.

“We’ve adjusted some prices around the world for the launch of iPhone 6s and 6s Plus... Obviously when we increase prices around the world, it’s normal to see some impact on sales rates,” Luca Maestri, Apple’s chief financial officer, said in response to a query about the currency movement and impact on demand in terms of volume units and revenues in some regions like India, Japan, and parts of Europe during the Cupertino-based company’s fourth quarter earnings call on Wednesday. But Maestri also said it was too early to arrive at any conclusion.

“…because the phones have been out there just for four weeks, so it’s bit early to tell. But so far we were encouraged by the response,” the Apple CFO said.

ET was the first to report about lower-than-expected demand for the new iPhones in the country due to high prices with consumers either buying from the grey market at substantially lower prices or waiting for a price crash or online discounts earlier this month.

The iPhone 6s and 6s Plus are selling at Rs 62,000-Rs 92,000 depending on memory and model, Rs 8,500-9,500 more than the last year’s launch price of iPhone 6 and 6 Plus and also Rs 14,000-16,000 costlier than their prices in global markets like the US, Middle East, Singapore and Hong Kong. Apple’s trade partners in India attributed the huge price difference of the new iPhones between India and many global markets to two factors: depreciation of the rupee against dollar whereby Apple had hedged the currency exchange rate, and higher tax, with imported smartphones attracting 11.5% more tax than locally assembled ones while this difference was just 5% last year.

But Apple remains optimistic about its long-term prospects in India. Its chief executive officer Tim Cook, in Wednesday’s earnings call, said the company was investing for the long term in a few markets like India where factors like currency were “transitional kind of thing”. “I was really impressed last quarter with our progress in Vietnam and Indonesia and India among others,” he said.

DISCOUNT PUSH

Apple said iPhone sales in South Asia, including India, during the July-September quarter was up by 35%. Analysts say sales during this quarter in India were driven by aggressive online discount on iPhone’s earlier models.

“In India the demand situation is still not vibrant for the new iPhones,” the chief executive officer of a leading cell phone retail chain said. “In fact, there is sufficient stock in India compared with markets like the US and China where demand is still more than supply,” said the CEO requesting not to be named.

Most big mobile and consumer electronics retail chains and even large ecommerce firms said sales of the new iPhones were at best matching last year, while some reported 20%-50% lower demand compared with last year’s demand for iPhone 6 and 6 Plus. Incidentally, Apple was targeting a two-tothree fold jump in sales of the new iPhones leading up to Diwali.

Apple Inc on Wednesday reported 63% growth in revenues from emerging markets at $79 billion, or about Rs 5,12,500 crore, for the fiscal year ended September 2015.

Cook said the company achieved this despite “very strong headwinds” from foreign exchange rates. Apple also posted largest absolute revenue growth ever, growing by 28% at $234 billion, or about Rs 15,18,000 crore.

The company had last month announced that it sold more than 13 million units of iPhones 6s and 6s Plus models in 12 markets including the US and China in just three days after launch, setting a new record for the company.

The company management during the call on Wednesday also said the new iPhones were selling more than last year’s launch.