Marked Upsurge in Domestic Home Appliance Production

EghtesadOnline: Local producers manufactured 52.9% more washing machines in the seven months to Oct. 21 compared with last year’s same period: 549,600 washing machines over 355,300, figures released by the Ministry of Industries, Mining and Trade show.

News ID: ۷۵۱۵۴۰

21 November 2020

Over 1.16 million refrigerators and freezers were manufactured by domestic producers during the seven months, registering a 24.6% rise year-on-year. However, the production of evaporative coolers saw an 18.1% decline to reach 697,500 this year, IRNA reported.

“A total of 650,000 television sets were produced during the period under review, registering a 30% increase year-on-year,” Mohammad Reza Shahidi, secretary of the Association of Audiovisual Device Producers, said.

Despite all problems, including the decline in allocation of foreign currency and shortage of raw materials, the domestic production of home appliances has been on the rise in recent months.

Some manufacturers have even posted a 100% increase in their output. For the first time, two well-known local companies launched the production line of dishwashers in the country.

“Nearly nine million devices were produced in the country last year. However, that 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 has been placed on their imports since two years ago. Some smuggled goods in the market have recently seen price increases.”

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, refrigerators and television sets posted a year-on-year growth of 12%, 12% and 3%, respectively. The industry experienced a 10% growth last year despite all the 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, stoves, television sets, blenders, electric fans for oven, furniture and 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, the secretary of the Association of Household Appliance Industries 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 sufficient to meet production costs?” he was quoted as saying by IRIB News.

In June, CPPO issued a permit allowing producers of home appliances to raise prices. Prices of audiovisual products are allowed to go up by 20% and other home appliances can up prices by 25% 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.

“The 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 prices.”

Thriving Black Market

The price hike of home appliances and problems related to a decline in supply 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 and 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 are sometimes offered on discount.

Bandar Genaveh in the southern province of Bushehr is another gateway of 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. 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 the secretary of Tehran Home Appliance Sellers Association, Akbar Pazouki.

“The 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 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 higher production and lower prices.”