Double-Digit Rise in Domestic Production of Home Appliances

EghtesadOnline: The domestic production of three types of home appliances in the first 10 months of the current Iranian year (March 20, 2020-Jan. 19) have increased while that of another declined, latest statistics released by the Ministry of Industries, Mining and Trade show.

News ID: ۷۸۶۰۰۴

15 February 2021

A total of 880,500 washing machines were produced during the period, showing a 53.2% growth compared with the similar period of last year, IRNA reported.

The manufacture of television sets during the same period reached 995,000, registering a 44.7% increase year-on-year.

A total of 1.68 million refrigerators and freezers were manufactured, indicating a 30.8% YOY rise.

Around 853,900 evaporative coolers were manufactured in local factories, showing an 11.9% YOY decline.

Despite problems, such as the decline in allocation of foreign currency and shortage of raw materials, the domestic production of home appliances has risen in recent months.

Some manufacturers have even posted a 100% increase in output. For the first time, two well-known local companies launched the production 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 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,” he added.

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 restrictions imposed by sanctions,” Mehdi Sadeqi-Niyaraki, a deputy industries minister, was quoted as saying by IRIB.

“Plans are to boost production by 34% in the current year for production to hit 11.6 million home appliances," Deputy Industries Minister Mohammad Reza Kalami has been quoted as saying by Tasnim News Agency, adding that by March 2022, Iranian production will meet total domestic demand.

Keyvan Gordan, director general of the Industries Ministry’s Electronic, Metal and Home Appliances Bureau, said the production of household appliances will break the all-time record this year.

“Home appliances’ market in our neighboring countries is as big as $37 billion per year. If the supply of raw materials and production procedures are facilitated and regulations are modified in favor of exports, we can significantly increase our share of the regional market,” he added.

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, freezers, evaporative coolers, washing machines, water heaters, stove, 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 increased by 212% from March to October, said Abbas Hashemi, secretary of the Association of Household Appliance Industries, 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 the production cost?” he was quoted as saying by IRIB News.

In June, CPPO 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 rise up to 25% compared with prices registered in the Iranian month ending Feb. 19, it said.

Until last year, which ended on March 19, imports accounted for 60% of the 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 the rise in prices.”

Thriving Black Market

Price hikes of home appliances and problems associated with buying them due to the 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; 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.

More than 50 websites are 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 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 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 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.”