Tough Times Ahead for Home Appliance Market

EghtesadOnline: The fear of raw material shortage has led producers of home appliances to scale down their output, the head of Iran’s Home Appliances Association said.

News ID: ۷۸۳۵۳۶

04 August 2018

Mohammad Tahanpour was elaborating on the recent price hikes and shortages in the domestic home appliance market.

“Shopkeepers are not to blame for the lack of household appliances; the capital possessed by them is limited so they cannot hoard goods. The rise in the prices of raw materials on the one hand and hurdles in the way of imports on the other have led to a supply shortage,” he said.

Mohammad Reza Diani, chairman of the Association of Producers of Home Appliances, told IRNA that prices did not go up overnight, but were kept unchanged ever since the fiscal 2016-17, Financial Tribune reported.

“Last year, raw materials used for production were purchased at a rate of 33,000 rials to the dollar, but now the US dollar is exchanged for 44,000 rials. On top of that, there is not enough foreign currency for all producers,” he said.

Referring to the price rise, 100% at times, of steel, petrochemicals, plastic, aluminum, copper and the like since the beginning of the current fiscal year (March 21), Diani said, “With the increase in the prices of raw materials, you cannot sell the final product cheap.”

He noted that unlike other industries, producers of home appliances don’t receive cheap raw materials, water, electricity and energy.

“The petrochemical industry enjoys cheap feedstock and the players of steel industry have cheap mines at their disposal. They are granted subsidized foreign currency for purchasing raw materials, yet they sell their final products at the rate of 44,000 rials to a dollar,” he said.

“The 40% rise in prices of home appliances is the least the struggling industry has managed to implement because producers get foreign currency at higher prices than the official rate while they are expected to sell their products at the official exchange rate.”

The official noted that the household appliance industry is operating at 30-40% capacity whereas it has the potential to meet twice the volume of domestic demand.

Referred to the remarks of a former lawmaker, Ahmad Tavakkoli, that South Korean companies should be boycotted for their country’s failure to buy Iranian crude oil, Diani said, “Korean brands tap into cheap facilities provided by our country and account for a big share of our market. The government needs to issue an ultimatum to these firms on their presence in our country.”

Alireza Mousavi-Majd, the managing director of Samsung in Iran, viewed the current market demand for household appliances as unrealistic and said the supply of products by this Korean company has grown by 100% since the beginning of the current fiscal year.

“There is a 40% marginal profit in the prices of household appliances, which goes directly into the pockets of profiteers. As we speak, raw materials available in the market are enough to address the need of production up until the yearend. Shortages and price hikes are the handiworks of middlemen,” he said.

On the call for boycotting South Korean brands, Mousavi-Majd said, “Korean companies in Iran have been set up with the investment of Iranians. These firms employ more than 10,000 people directly and about 100,000 indirectly. Boycotting these companies and discouraging people from buying their products would lead to the unemployment of our fellow Iranians. Impulsive decisions by officials would bring about damaging consequences to the economy.”

Despite the rise in workers’ salaries and other expenses, the Consumers and Producers Protection Organization has only allowed an 8% rise in the prices of Samsung’s products since March 21.

“Parts needed to manufacture appliances like television have seen a rise of about 60%, but we are selling our products at prices approved by the government,” he concluded.