Foreign Toy Makers Struggle To Shift Production Base From China To India

New Delhi, Jan 16 (KNN) Toy manufacturers facing escalating production costs in China are encountering obstacles in their attempts to shift operations to more affordable centres.

Six years ago, Hasbro, a major player in the toy market, approached Indian durable goods and aerospace supplier Aequs to subcontract, aiming to move a substantial portion of their production from China to India, reported Reuters.

Despite Aequs now producing various toys for Hasbro and others in India, manufacturers acknowledge the efficiency gap between India and China poses challenges in transitioning to lower-cost bases, potentially leading to increased toy prices if the bulk of production remains in China.

Rohit Hegde, Aequs' Head of Consumer Verticals, highlights the disparity in infrastructure, citing China's superior port and road facilities developed over the last three decades.

While India and other countries struggle to match China's efficiency levels, toy makers, including Hasbro and Mattel, are coping with the risks associated with over-reliance on China, exposed during the COVID-19 pandemic when Chinese ports faced difficulties exporting goods.

Driven by soaring labour costs in China, manufacturers across industries are diversifying production geographically.

A report by Rhodium Group reveals a significant increase in U.S. and European Greenfield investment in India, reaching USD 65 billion or 400 per cent between 2021 and 2022.

Conversely, investment in China decreased to less than USD 20 billion in 2022 from a peak of USD 120 billion in 2018.

Despite this trend, toy makers find it challenging to shift production, especially given the highly seasonal nature of the industry.

S&P Global Market Intelligence's Chris Rogers emphasises the complexity of re-shoring away from China, particularly for toy manufacturers who face difficulties managing inventory due to seasonality.

Ensuring safety, ethical sourcing, and fair treatment of workers further complicate the transition. While China's minimum wage ranges from 1,420 to 2,690 yuan per month, unskilled and semi-skilled workers in India can be secured for 9,000 to 15,000 Indian rupees per month, according to central bank estimates.

Despite these cost differentials, transitioning to other countries presents logistical challenges, with the setup period ranging from 18 months for product acquisition from a contract manufacturer to up to three years for building a new factory from scratch, according to Rogers.

The autumn production cycle for toys, starting in May and involving storage or shipment, adds an additional layer of complexity to the process.

(KNN Bureau)