Domestic Chiller Producers at Mercy of Foreign Brands

Expanding cities and warming climate in the Iranian plateau have boosted demand for air conditioners in the Iranian market.

A considerable amount of refrigeration equipment are being imported into the country every year, in a market that is large enough to accommodate both Iranian and international companies. However, domestic firms have little share in the Iranian market, says Mohammad Hassan Jalaleddin Abyaneh, founder and CEO of Viuna HVAC that has been producing air conditioning systems for 25 years.

“Iranians are scared of buying domestic products as a result of international companies’ publicity,” Abyaneh told Financial Tribune on the sidelines of the 15th International Exhibition of Heating,  Ventilation, Air Conditioning and Refrigeration, otherwise known as “IRAN HVAC&R 2016”, which was held in Tehran on October 18-21.

The latest data indicate that Iran’s chiller market stood at $154.8 million in 2014, rising 1.1% compared with the year before.

Absorption chillers account for a whopping 40% of this market–a share well above those of other Middle Eastern countries.

Market leaders include Japanese companies such as Ebara Refrigeration Equipment and Systems Co. and South Korean firms like Century Corporation and LG, which have long monopolized the Iranian market.

According to Abyaneh, foreign brands owe their success to effective branding and distribution strategies, apart from tuning in to consumers’ taste to win over domestic brands.

This has raised the specter of bankruptcy for many Iranian manufacturers and has put the future of the domestic chiller industry at risk.

This comes against the backdrop of an overall slowdown in the industry amid a slump in the housing and construction sector during the past few years. Nonetheless, this is bound to change for the better, as construction is expected to bounce back following a longstanding recession.

The latest CBI data show that the total number of home sales in Tehran reached 83,199 during the first half of the Iranian fiscal year, marking a 14.7% growth compared with last year’s corresponding period.

Figures also indicate a 10% rise in the total number of housing units sold during the Iranian month ending on September 21.

Although A/C manufacturers have taken quite a few blows from the recession, according to Abyaneh, the business has not been dull, as a major part of chiller sales currently concern buildings whose A/C equipment have become dilapidated over time.

Imported chillers mostly have a short lifespan. This has given rise to growing skepticism regarding the absorption chillers, leaving customers with no choice but to turn to other types of A/C systems such as compression chillers that are less efficient.

“The problem with these types of chillers is that their parts are mostly imported. We are not able to manufacture their compressors, which account for 75% of the machine,” Abyaneh said.

“This is while almost all the parts used in absorption chillers can be produced domestically, which is an opportunity to create jobs and contribute to the domestic economy.”

In recent years, Viuna HAVC has been working to achieve a level of quality that is on par with that of renowned international companies.

According to Abyaneh, considering the prices of domestic products that are much lower than imported chillers, domestic products are much more reasonable for the customers, if promoted properly.

With its plant headquartered in eastern Tehran, Viuna has created 50 jobs, directly and indirectly, and its CEO says the firm plans to expand its business and increase the number of its employees.

“I think the future is bright,” he says. “During the exhibition, we have received an OEM (Original Equipment Manufacturer) offer from a Japanese company.”

An OEM is a company that manufactures parts or products for another company.

Abyaneh refused to give more details about the company, but said a contract will be signed after the exhibition.

Highlight: Iran’s chiller market stood at $154.8 million in 2014, rising 1.1% compared with the previous year’s figures, while absorption chillers account for a whopping 40% of this market