The ban on the import of home appliances, first implemented around three years ago, has been extended and will remain valid at least until the end of the current Iranian year (March 2022), according to deputy minister of industries, mining and trade, Mehdi Sadeqi Niyaraki.
Noting that Iran’s home appliance industry needs close to 220 trillion rials ($797 million) in annual working capital to meet domestic demand, the official said domestic production rose by 40% in the last fiscal year (ended March 20, 2021), Mehr News Agency reported
Mohammad Hossein Eslamian, the deputy head of Home Appliance Sellers Association, told ILNA that imports can damage domestic production in areas where we have made progress, built capacity and set up production lines over the years, but in case of appliances where local production cannot meet domestic demand or lacks the required quality, it will be beneficial.
“There are certain household appliances for which there is domestic demand, but we don’t have the manufacturing ability. This demand does not vanish because local industries cannot supply it, so it is instead supplied by smuggling into the country,” he added.
Eslamian believes the ban on the import of these products needs to be lifted so the economy can benefit from legal import tariffs while meeting domestic demand.
“We have the option of importing spare parts. This way, we can fill in the technological gap and transfer technical know-how, increase product quality and reduce contraband in the market. This will also generate numerous job opportunities for our youth,” he added.
The official acknowledged that import bans are not permanent anywhere in a country’s industry and economy.
“If we want our home appliance industry to grow and find the capability to compete in both domestic and international markets, we have to prepare the grounds for it. One way to do this is to lift import bans so local industries feel the need to up their game, build the required infrastructure, acquire the latest technologies and improve their product quality,” he said.
According to the head of Iran’s Household Appliances Industry Union, Iran’s home appliance market is currently worth $6 billion per annum, 40% of which are dominated by contraband.
“Smuggled home appliances make up around $2.5 billion of the domestic market. The share of smaller items and kitchenware such as cutlery, crockery and crystal artifacts are higher, which has put the producers of these products in a hard place,” Alireza Mohammadi Daniali was also 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 giants of home appliances left Iran to flee the economic sanctions against the country and the repercussions that would plight them, local producers stepped in and filled the void.
Noting that smuggling is harming local businesses, Mohammadi urged 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 its domestic production and safeguard its industries and employment. Here, the private sector, Iran and Tehran chambers of commerce in particular, should step in and do their part as well.”
Due to weak economic diplomacy on the part of the government, he said, the export of Iranian home appliances only averages $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,” he added.
Industries Ministry’s Latest Data
The domestic production of refrigerators and washing machines grew while that of TVs declined in the first four months of the current fiscal year (March 21-July 22), latest data published by the 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.
Production of washing machines stood at 430,700 during the same period, 36.2% higher than the 316,100 devices manufactured 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 blames 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 the domestic production of this product,” Mohammad Reza Shahidi was also quoted as saying by IRNA.
According to the official, coronavirus lockdowns, power outages and decline in people's purchasing power are domestic factors behind the decline in TV production.
“The ban on imports of home appliances in the year ending March 2019 energized local production. As we speak, domestic production meets 60% of demand for home appliances. The remaining 40% are met through international brands and import exemptions considered for 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 nears $1.5 billion.
The domestic production of home appliances has been on the rise in recent months and some manufacturers have even posted a 100% increase. For the first time, two well-known local companies launched the production line of dishwashers in the country, IRNA reported recently.
“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 petrochemical industry. Home appliance producers refused to sign export contract because they were not confident that there would be a sufficient inventory 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 are also posing challenges to the industry.”
“At present, close to 150 types of television sets from 32 inches to 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,” Hashemi 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 the import ban placed on 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 amounts to more than 700,000 sets per year,” he added.
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 robs domestic products of their ability to thrive.
