Strong Rise in Domestic Home Appliance Production

EghtesadOnline: The domestic production of three types of home appliances has increased, latest statistics released by the Ministry of Industries, Mining and Trade showed.

News ID: ۷۵۱۰۶۵

22 September 2020

About 481,600 television sets were produced in the country during the first five months of the current Iranian year (March 20-Aug. 21) to register a 78.7% growth compared with the similar period of last year, IRNA reported.

A total of 368,400 washing machines were manufactured during the same period, registering a 58% increase YOY.

A total of 673,800 refrigerators and freezers were manufactured over the five-month period, indicating an 18.8% year-on-year rise.

Between 30-35% of home appliances and spare parts are imported and the rest are produced in local factories.

Secretary-General of Iran’s Home Appliances Association Habibollah Ansari told Financial Tribune last year that the production of Iranian household appliances meets 70% of domestic demand.

“The rise in production has come about in the midst of heavy economic sanctions worsened by the spread of Covid-19 pandemic. To top those, imports and the supply of required raw materials have been hampered by delays caused by the Central Bank of Iran in allocating forex to manufacturers. Yet, over a month ago, promises were made and businesspeople active in home appliances industry are now experiencing less problems in procuring the needed forex,” he said.

Iran’s output of home appliances increased by nearly 8% in the last Iranian year (March 2019-20), a deputy industries minister said in June.

“Plans are to boost production by 34% in the current year for production to hit 11.6 million home appliances," Mohammad Reza Kalaami was also quoted as saying by Tasnim News Agency, adding that by March 2022, production will meet total domestic demand.

10% Growth Last Year

Last year, the production of small appliances, refrigerators and TV sets posted a year-on-year growth of 12%, 12% and 3%, respectively, registering a 10% growth last year despite restrictions imposed by sanctions, Mehdi Sadeqi-Niyaraki, deputy industries minister, was quoted as saying by IRIB.

“Nearly nine million appliances were produced in the country last year, which is barely 50% of the industry’s potential,” Kayvan Gordan, another senior official with the ministry, said.

“There is no shortage of supply of home appliances, though a ban is in place on their imports since past two years. Some smuggled goods in the market have seen price increases recently.”

Domestic demand for home appliances was around 13.6 million in the year ending March 2018, but has now reduced to 12 million given the rise in the value of foreign currencies and prices.

Iran Consumers and Producers Protection Organization recently issued a permit allowing producers of home appliances to again raise their prices. Prices of audiovisual products were allowed to rise by 20% and other home appliances by 25% compared with prices registered in the Iranian month ending Feb. 19.

Producers of home appliances blame the 50% rise in prices of steel sheets and the metal’s shortage in the market, ban on imports, the outbreak of coronavirus and the depreciation of national currency against foreign currencies in the first quarter of the current Iranian year (started March 20) for the skyrocketing prices.

Unofficial reports say presently prices are 30-60% higher than at the beginning of the current Iranian year and producers have reduced their market supply. Salespeople say companies are making considerable delays in supplying products to distributors.

Thriving Black Market

Price hikes of home appliances and problems associated with shortage have prompted customers to approach unofficial markets that have developed across the country’s borders to the west and south, the Persian-language daily Etemad reported.

In fact, the gap between supply and demand is filled by contraband home appliances; smugglers have overtaken licensed importers.

Baneh in the western province of Kurdestan is a well-known gateway for smuggled products for 15 years now.

“Buying from Baneh” is one of the main Google trends now. There are more than 50 websites dedicated to selling home appliances from Baneh. These websites are not filtered; various methods of purchasing and long-term warranty and after-sales services have been posted on these websites to ensure customers feel they are in the right place.

By and large, the prices of products on these websites indicate a wide gap with those in official markets. They are all available and sometimes offered on discount.

Bandar Genaveh in the southern province of Bushehr is another gateway to smuggled home appliances. Close to 30 channels on Telegram messaging app encourage customers to buy cheaper, high quality home appliances.

For example, a washing machine of an international brand is valued 70-100 million rials cheaper in Genaveh compared with Tehran’s online or bricks-and-mortar shops. You can find a variety of such offers in Qeshm and Daragahan in Hormozgan Province.

Rising Demand for Repair

Demand for home appliance repair has increased by 90% on the back of price hikes, says Secretary of Tehran Home Appliance Sellers Association Akbar Pazouki.

“The rise in prices and decline in people’s buying power have pushed the market into recession. There are practically no customers in the store, except for dowry purchases.”

Noting that providing working capital is the only way to help manufacturers boost their production, Pazouki said, “Local producers have managed to increase their output by 30-100% in recent years, but their supply has yet to meet the total market need. Offering loans to producers rather than customers would lead to higher production and lower end prices.”

Statistics provided by the Ministry of Industries, Mining and Trade show Iranian companies manufactured 210,200 TV sets over the first quarter of the current year (March 20-June 20), registering a 49.4% growth year-on-year.

Refrigerator and freezer production increased by 7.9% to reach 328,500 and a total of 207,400 washing machines were manufactured in Q1 to post a 115% rise YOY, IRNA reported.