52% Rise in Production of Home Appliances

EghtesadOnline: A total of 1.96 million household appliances were produced during the first half of the current Iranian year (March 20-Sept. 21) to register an increase of 52.8% over the same period of last year.

News ID: ۷۵۱۳۹۱

01 November 2020

According to a report by the Ministry of Industries, Mining and Trade, 454,100 washing machines were produced during the period, which indicate a 54.5% growth year-on-year.

A total of 590,500 televisions were manufactured during the period to register an 84% year-on-year rise. Some 919,600 refrigerators and freezers were produced during the same period, up 37.1% YOY, IRNA reported.

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

“There is no shortage of supply of home appliances, though a ban is placed on their imports since two years ago. 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.

“Last year, the production of small appliances, refrigerator and television posted year-on-year growth of 12%, 12% and 3%, respectively. The industry experienced a 10% growth last year despite all restrictions imposed by sanctions,” Mehdi Sadeqi-Niyaraki, deputy industries minister, was quoted as saying by IRIB.

$139m in Exports During Five Months

Latest statistics show Iran exported 99,000 tons of home appliances worth $139 million during the five months to Aug. 21.

According to Mohsen Montazeri, an official with Trade Promotion Organization of Iran, refrigerators and freezers, evaporative coolers, washing machines, water heaters, stove, television sets, blenders, electric fans for oven, furniture and china ceramic dishware were Iran’s main exported products.

Iraq, Afghanistan, Oman, Turkey, Azerbaijan and Italy were among the main destinations.

“A total of $243 million worth of household goods, mostly intermediate goods, were also imported during the period,” the official was quoted as saying by ILNA.

Rising Costs

The average price of steel has increased by 212% from March to October, Abbas Hashemi, secretary of the Association of the Industries of Household Appliances of Iran, said, adding that copper and aluminum prices have also risen by 150% during the period.

“Raw materials of home appliance industry are calculated based on global prices and foreign exchange rate. Therefore, how can you expect the 25% rise in the price of appliances approved by Iran Consumers and Producers Protection Organization earlier this year to be enough to meet the production costs?” he was quoted as saying by IRIB News.

In June, ICPPO issued a permit allowing producers of home appliances to raise their prices. Prices of audiovisual products are allowed to go up by 20% and other home appliances can have up to 25% increase compared with prices registered in the Iranian month ending Feb. 19, it said.

“Up until last year, which ended on March 19, imports accounted for 60% of household appliance market,” Hamidreza Ghaznavi, the spokesman of Home Appliances Manufacturers Union, said.

“Sudden departure of international companies from Iran’s market due to US sanctions and problems regarding the supply of raw materials are to blame for the lack of balance between supply and demand, and increase in prices.”

Thriving Black Market

Price hikes of home appliances plus problems associated with buying them due to the decline in their supply have prompted customers to unofficial markets that have been 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 Geanaveh 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 at 70-100 million rials cheaper in Genaveh compared with Tehran’s online or bricks-and-mortar shops. A variety of such offers have also been sourced to Qeshm and Daragahan in Hormozgan Province.

Rising Demand for Repair

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

“Increase 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 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 need of the market. Offering loans to producers rather than customers would lead to more production and consequently lower end prices.”