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espite rising production costs driven by a weaker rupiah, electronics manufacturer PT Panasonic Gobel Indonesia (PGI) will only increase the price of its home appliances by 10 percent thanks to the exclusion of its products from the luxury goods tax.

PGI vice president director Rinaldi Sjarif said the weakening of the rupiah had pushed production costs up roughly 20 percent, as the company still imported raw materials, such as steel, for their manufacturing process.

Some of the home appliances were considered luxury goods and therefore subject to a 10 percent sales tax. But, now, the designation, and the tax, have been dropped.

'The [government's] policy in removing the tax, which applies on some home appliances, such as televisions and refrigerators, has resulted in a 10 percent cost reduction,' Rinaldi said.

'The impact from the fall in the rupiah gets an offset from the tax omission. Consequently, costs have only increased by 10 percent,' he added.

The Finance Ministry has recently removed certain electronic home appliances from the luxury goods list, given that those products have become a fixture in many households.

These products include television sets with screens measuring less than 40 inches and priced below
Rp 10 million, refrigerators under Rp 10 million and air conditioners cheaper than Rp 8 million.

Rinaldi added that as a result of this countering effect, the prices of products would therefore increase by only 10 percent in general.

'However, the final price increase will also be affected by the rise in logistics costs offset by efficiency measures in our manufacturing process, such as by reducing inventory,' he said.

Televisions, air conditioners, refrigerators and audio equipment are integral to sales earnings of PGI.

PGI president director Hiroyoshi Suga said these products drove much of the 15 percent year-on-year sales growth the electronics manufacturer experienced in its first quarter, the period from April to June. PGI is currently in its second financial quarter.

'We have even set a historical sales record in June, during which we sold 90,000 refrigerators. This marks a 20 percent to 30 percent year-on-year increase,' he said.

'The June and July hot season is especially good for cooling products, such as refrigerators and air-conditioners,' he noted.

As for televisions, Suga said Panasonic has sold two times as many televisions in the first quarter this year compared to last year and has expanded into the middle segment market by introducing their 29-inch screen television.

Rinaldi added that Panasonic had traditionally sold televisions with larger screens measuring 40 inches and above, which typically fall in the premium category.

Given the high demand from the medium segment, however, Panasonic has begun to eye this category as well.

'We want to strengthen our television line by introducing smaller screens that carry more affordable prices. Our 29-inch screen, for example, is priced at around Rp 2 million, whereas our 65-inch plasma panel goes for roughly Rp 40 million,' he said.

He further added that down the line, Panasonic would aggressively introduce new products in the third quarter, specifically in October and November, given that those months represented high year-end sales periods.

'We will also focus on home appliances because this segment contributes 40 percent to our overall sales,' he said.

He added that the electronics manufacturer planned to open two more branches in Indonesia.

'We will set up shop in Bandung and Yogyakarta in the remaining quarters, and this will expand our number of branches to 17,' he said.