There is no hiding the fact that Chinese hardware maker LeEco is facing an intense cash crunch. As acknowledged and announced just last month, the company would reduce their pace of global expansion, start cost cutting, and focus on the growth of existing businesses. And it’s now mulling over the decision to scale down its operation in India, reports ET.
Citing sources aware of the matter, the report states that the Chinese giant is looking to curtail its expansion and product release plan due to reduced funds supply in the Indian operations. LeEco is further foiling its ambitious goal of setting up over 500 offline single brand stores, slashing over 1,000 in-store temporary jobs and advertising budgets. Since the cost of selling devices is lower as compared to doing the same offline, the company will be focusing on its e-commerce strategy.
Though the company has just recently received a $600 million survival grant, it’s looking to sack the Indian team and slow down the release of new handsets until the situation is under control. The anonymous executives aware of the matter are also blaming demonetisation as one of the causes for the reported move to scale down operations in the country. Talking about the same, a senior trade partner says,
LeEco India could have sailed through for some more time, but demonetisation hit sales badly. While other brands launched promotional offers like finance schemes, there was nothing from LeEco.
The company is also looking to sack parts of the Indian operational team and slow down the release of new smartphones until the situation is under control. The online-only strategy will be applied for the same time period and then LeEco might make a return to an offline retailer near you. It will be important to see what route the company takes once it has regained pace and is back on track with their growth figures.
Earlier in November, LeEco co-founder Jia Yueting wrote a lengthy apology letter to shareholders mentioning that the company has grown at an unruly pace — which is true if you look at their device release cycle and electric car LeSee. Due to the same, the company rapidly burnt their cash reserve and has only limited capital and resources at hand. Thus, the company is now following cost-cutting programs to sustain the business in important geographies, especially China, India and U.S (where it ventured into just recently).
But, with one less competitor in the market, the business of other smartphone manufacturers who’re trying to hog a big chunk of the pie in the country will flourish. Chinese upstarts like Xiaomi, Oppo and Vivo will have to face one less homebrewed counterpart and can focus on sales instead of profits — which are already non-existent as stated by Xiaomi.
We’ve contacted LeEco and will update you once we hear back from them.
