Iran’s home appliance market is currently worth $6 billion per annum, 40% of which are dominated by contraband, according to the head of Iran’s Household Appliances Industry Union.
“Smuggled home appliances make up around $2.5 billion of the domestic market. The share of smaller items and kitchenware like cutlery, crockery and crystalware are higher, which has created difficulties for the producers of these products,” Alireza Mohammadi Daniali was quoted as saying by the news portal of Tehran Chamber of Commerce, Industries, Mines and Agriculture.
Since past two years, he added, when the international producers of home appliances left Iran to avoid economic sanctions imposed on the country and their repercussions, local producers stepped in and filled the void.
“Last year [March 2020-21], production of domestic household appliances saw a 60% rise compared with the year before. This shows investments in the industry have significantly increased. Yet, smuggling is harming local businesses.”
Mohammadi asked the government to step in and support the domestic firms, given that on top of the contraband issue, producers are now dealing with the Covid-19 pandemic, consumers’ reduced purchasing power and a stagnant market.
“We are not saying that imports must be banned. What we want is for official imports to take place under the industrial strategic framework. The Iranian government, like all others across the globe, from the US to China, should support domestic production and safeguard its industries and jobs. Here, the private sector, Iran and Tehran chamber of commerce in particular, should step in and do their part as well,” he said.
“Due to weak economic diplomacy on the part of the government, exports of Iranian home appliances only average $200 million per year, which is much less than what the country is capable of. These products are mainly exported to Iraq, Afghanistan, Azerbaijan Republic and Armenia and a small portion goes to some European countries.”
Industries Ministry’s Data
The domestic production of refrigerators and washing machines grew while that of TVs decreased in the first four months of the current fiscal year (March 21-July 22), latest data published by Ministry of Industries, Mining and Trade show.
A total of 692,000 of refrigerators and freezers were produced during the period, registering a 20.4% growth in output compared with 574,900 devices produced in the corresponding period of last year, IRNA reported.
The production of washing machines stood at 430,700 during the same period, 36.2% higher than the 316,100 devices made in the same period of last year.
A total of 347,800 TVs were produced by Iranian producers from March 21 to July 22, 4.3% less than 363,500 in last year’s corresponding period.
The secretary of the Association of Audiovisual Device Producers blamed the decline on one global and three domestic factors.
“The crisis of global shortage of microchips, especially microprocessors, which are the core of the central television system, has had a negative impact on domestic TV production,” Mohammad Reza Shahidi was also quoted as saying by IRNA.
According to the official, the coronavirus lockdowns, power outages and decline in people's purchasing power are the main factors behind the TV production decline.
“The ban on imports of home appliances in the year ending March 2019 energized local production. At present, domestic production meets 60% of demand for home appliances. The remaining 40% are met through international brands and exemptions considered for imports by those living in border towns. We need to provide opportunities for residents of border towns to make a living via cross-border trade,” Ali Moayedi Khorramabadi, the head of Iran’s Headquarters to Combat Smuggling of Goods and Foreign Exchange, was recently quoted as saying by IRNA.
According to the official, the value of home appliances imported by residents of border towns is nearly $1.5 billion.
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, IRNA reported.
“The growth in production of home appliance during the current Iranian year has been unprecedented in the past decade,” Abbas Hashemi, secretary of the Association of the Industries of Household Appliances of Iran, was quoted as saying by IRIB News.
Noting that the main challenge facing the industry is the insufficient supply of raw materials, the official said, “For instance, manufacturers of refrigerators and freezers need a common thermoplastic polymer called ABS [Acrylonitrile Butadiene Styrene]. The Industries Ministry should provide raw materials, in cooperation with the petrochemical industry. Home appliance producer refused to sign an export deal because they were not confident that there would be a sufficient supply of petrochemical raw materials. The supply of steel sheets, copper and aluminum parts, as well as the allocation of foreign currency for the purchase of essential imported parts, is also posing challenges to the industry.”
Shahidi noted that at present, close to 150 types of television sets from 32-75 inches are manufactured in 14 factories across the country.
“Our overall production capacity is three million sets per year, yet actual production stands at 1.5 million,” he was quoted as saying by IRNA.
The official noted that domestic demand stands at 2.2-2.4 million TV sets per year.
“Due to a ban the import of home appliances, the remaining demand is supplied through contraband. Our estimates are that more than 2,000 television sets are smuggled into the country every day, which constitute 700,000 sets per year,” he said.
Without paying tax, import duties, insurance fees or other such expenses, smugglers can sell their goods at competitive prices in the local market and this adversely affects domestic products.
“We expect TV production to reach 1.6-1.7 million sets by the yearend [March 2022] to register a 30% growth compared with the corresponding period of last year. This will only come about, if production firms receive the foreign currency needed to import raw materials and smuggling is combated effectively,” Shahidi said.
