Home Appliances Industry
Home appliances industry as a profitable one in Iran with over 50 years experience in the diversity and intensity of production in the areas needed, accounts one of the most important and greatest industries that also has had an acceptable contribution in job creation, this industry has faced with an unprecedented and historic
challenge and opportunity. Globalization and presence in international marketplaces require to produce home appliances with high quality and competitive prices in global scale. Global trade moves toward openness, tariff barriers reduction and non-tariff restrictions repeal and meanwhile market competitiveness is based on final price.
Review of situation, changes and developments of internal market in order to estimate effective demand and efforts to upgrade technology and market development are among the most important economic competition foundations in domestic and international arena.
Home appliances industry is crucial in Iran’s economic system from different directions, from one side, there is really a growing need for the industry’s durable products with high quality and standards ( that this need relates to rising living standards and social welfare directly ) and the other hand the industry involves a large number of employees in various groups and levels. Home appliances’ global markets should be viewed with a deep and closer look to globalize the industry which pursue to gain right place and share of global marketplace due to export about 50 percent of manufactured products as expected, otherwise, the competition arena will be extremely tight for all domestic producers with the massive influx of foreign companies’ products and declining competitiveness.
Home appliances industry with relatively long history has provided major needs from domestic suppliers from the previous years, the industry with 38 percent share of total industrial exports and the share of 7.5 percent in employment is a crucial industry with high investment volume in Iran and has a good capacity in gaining foreign exchange, as well as, its products are categorized in two groups : related parts and end consumer products, the latter cover a wide range and their export trend fluctuates during 10 years ago proportionate with economic conditions of Middle East, target countries and effective indicators in global trade.
The most important export target countries include Iraq, Afghanistan, Algeria, Sudan and United Arab Emirates, also water coolers are among the major exported products with $ 171 million to these countries. Major imports of home appliances to Iran are from countries as United Arab Emirates, China, South Korea, Germany, Italy and Japan by quantity order that imports share of United Arab Emirates and China is 90 percent with regards to their cost effectiveness. Nowadays, facts and figures indicate that foreign brands have 75 percent of home appliances’ business share in Iran and internal production can only cover the remainder of 25 percent ( a business with a value of $ 6 billion ), there is a reality that why this huge market must be decisively in possession of foreign brands for the past twenty years and indeed it is simply recognizable that the business essentially requires planned and urgent transfer of technology, equipments and machinery of parts’ manufacturing.
Iran with 15 percent of total market volume of Middle East is considered as the largest consumer market for household appliances in this region, foreign brands shares in audio and video, refrigerator and freezer and washing machine and dish washer products are 95, 60 and 55 percent respectively. It is expected that Iran’s home appliances market volume will grow 4 percent annually within the next 10 years. Assembly phenomenon has become widespread in recent years in Iran as regards that it has higher profitability than complete production, because import tariffs of different kinds of SKD and CKD parts are between 15 and 35 percent, while import tariffs of home appliances are between 70 and 110 percent. Attracting foreign direct investment, applying proper management, providing access to technology tools, preparation of internal motivation and business skills, training work force and accomplishing R&D activities lead to industry development and promotion.
Home appliances industry is among selected seven industries that are especially addressed by ministry of industry, mine and trade in recent years in Iran and it is anticipated that accordingly this industry is able to reach to 2nd place in Middle East with 16 millions household appliances production annually ( six other industries include automobile, steel, textile and raiment, cement, tire, ceramic and tile ). Of course, many experts believe that home appliances industry has second order of importance and priority in Iran economy after automotive industry and the government has certainly planned to create one or two international brand with minimum 50 percent of domestic marketplace coverage potential and focus on increasing sustainable export, diversity, quantity and quality product.
In addition, supports and investments in order to transfer, promote and localize of modern technology, clarify related regulations, organizing official and unofficial imports, setting up specialized centers for design, research and development, test and engineering services, creating advanced and supplementary industries and providing conditions for strengthening the participation and partnership of foreign investors have predicted.
- Low quality of some internal manufactured products
- Failure to provide appropriate after-sales services
- Weak regulations and lack of transparency of uptodate commercial and economic information
- Applying out-of-date technology and production processes
- Failure to address to research facilities, academic studies and expert and trained human resources
- Lack of adequate attention to brand and its role in advancement and productivity
- Young Work force existence
- Possibility of applying expert human resources in various fields and disciplines
- Low dependency to foreign exchange
- Household needs diversity fitted to welfare level growth
Recommended approaches and solutions :
- The optimal use of domestic existing advantages and potentials, comparative energy advantage and foreign investments as necessary
- Continuous brand expansion from designing and manufacturing to services, before, during and after sales with aiming at industry development at the national and international levels
- Planning and directing private sector investments
- Take necessary actions in order to improve the quality of products
- Prioritizing to export areas