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Chamber of Commerce Letter; (A publication of Iran's Chamber of Commerce, Industry and Mines); February - March, 1995; By: Javad Salehi

Summary:

Household appliance manufacturing is one of the industries in Iran that are profitable and have good investment potential. At present, the production of household appliances does not meet the demand within the country.

Household appliances produced in the country do not meet the requirements of Iran's 60 million people. That is why imported commodities are easily marketed within the country. There are very few manufacturers of household appliances; nevertheless, this industry is facing major problems. The high cost of production coupled with the diminishing purchasing power of consumers have made these products less competitive in the market. As a result, domestic producers are registering losses. Non-replacement of old machinery and the depreciation of production equipment in factories are matters that also need to be addressed seriously.

The household appliance industry currently needs to be supported so that it can have a greater share in the national economy. If careful planning and correct methods are implemented, this industry will be given a boost.

According to present statistics, the total annual production capacity for household appliances, based on a two-shift operation, are as follows:

- The total production capacity of ten manufacturers of gas and kerosene heaters is approximately 1.5 million units per year. At present however, most of these producers do not make kerosene heaters.

- About 1.3 million refrigerators, freezers and freezer-refrigerators are being manufactured by 8 big factories.

- A total of 600,000 compact and wall-installed gas and kerosene water heaters are being produced by seven factories, while most of the small units and workshops are producing gas water heaters.

- 250,000 automatic washing machines are being made by three factories in the country.

- 800,000 table and wall mounted fans are manufactured by two factories.

- Two factories are producing 240,000 units of juice extractors and mixers.

- Two factories are making 400,000 units of rice cookers and slow cookers.

- A total of 240,000 mincers are produced by two factories per year.

- 400,000 electric vacuum cleaners are manufactured by three factories.

- A total of 80,000 gas ranges with ovens are produced by 12 factories. Small workshops are also manufacturing gas stoves.

- 650,00 water coolers are made by seven factories.

According to reports received from the General Department for Metal Industries in the Ministry of Industry, during the First Five Year Plan (1989 - 1993), metal products registered a positive growth. Some products showed a steady rate of growth while others had growth patterns which reflected market fluctuations. Improvements in the industry resulted from the injection of 1.5 billion dollars during the First Plan period.

The investments that were made for the renovation and reconstruction of the industry and the employment of modern techniques enhanced production quality.

Moreover, the commissioning of quality control lines, implementation of research, innovations, tests, design, engineering, participation in domestic and foreign fairs, and the use of computer software were fundamental factor that contributed to quality enhancement in this sector of industry. The Iran Standards Organization has also played a key role in publishing compulsory regulations that encourage the adoption of standards. The exportation of some household appliances to neighbouring countries and to Europe is proof of the improved quality of these products. If the policies promulgated during the First Plan continue, production units will also be able to continue with their quality improvement process. Otherwise, the present obstacles will weaken the chance of achieving this end.

Over the First Plan period, 20 million units of heaters, gas ranges, water heaters, gas cylinders, refrigerators, freezers, washing machines, vacuum cleaners, and other household equipment were manufactured and sold.

Although we have no precise statistics on the real demand for household appliances, considering a 10 percent rise in the number of families and the need to replace old equipment, there will be a need for another 600,000 units of refrigerators, freezers, gas and kerosene stoves, electric vacuum cleaners and fans. The use of water coolers depends however on the number of houses which, at present, is parallel with the quantity of coolers produced.

After the victory of the Islamic Revolution, major projects for producing household appliances were launched. Most of these units, however, were small or medium size factories that employed simple technology and followed old methods and procedures. As a result, these units have not made a remarkable improvement, and their output cannot compete with similar foreign products. To replace existing factory machinery in the country, several projects are being implemented such as for the manufacture of refrigerators and no-frost freezers by Azmayesh Company, the machinery of which has been ordered from another country. Meanwhile, some other companies are negotiating with foreign suppliers to replace their present production lines. One example is the Bahman Factory which has 35 years of experience and is one of the oldest refrigerator and freezer manufacturers with an annual production of 190,000 refrigerators and freezers.

With the use of new machinery within a period of three years, this factory intends to raise its production to 500,000 refrigerators per year. The first phase of its plan began several months ago and targets a nominal capacity of 180,000 13 cu.ft. refrigerators called Philver. In cooperation with the Italian `Merlooni' Company, which manufactures Ariston and Indezit refrigerators, the Bahman factory will produce Ariston refrigerators for export to regional countries and international markets. So far, the factory has spent 7.5 million dollars for this new line and expects a return on its investment in the next two years.

Other complementary projects to be commissioned within the next 2 or 3 years include the Pars Khazar factory, which produces vacuum cleaners, the Azmayesh company which will produce a new model of gas heaters, and Arj, which will manufacture hanging (wall) water heaters and washing machines. The Bahman factory also has a project planned for the manufacture of washing machines.

During the first five months of 1373, 1,622 million dollars worth of household appliances were exported. Out of this amount, 1.6 million dollars came from electric items and 62 million dollars were from industrial commodities. Total metal exports increased by 24.9 percent in weight and 17.7 percent in value compared to the same period last year. The majority of the export goods were water heaters, heaters and gas stoves.

In general, manufacturers had many problems, the most important of which were the following:

- Lack of up-to-date technology and qualified specialists.

- Dearth of research and laboratory facilities in factories to analyze production technology. As a result, the technique used by domestic manufacturers were antiquated and the goods were unsatisfactory because of too much money spent, too much energy and timeemployed, and a lack of elegance in the finished products.

- Lack of local designers familiar with this industry. As a result the commodities produced were poor in quality and lacked beauty.

- Non-exportation of household appliances, the inability of domestic manufacturers in introducing new models that could compete in foreign markets were factors that caused the industry to merely be a user of foreign exchange. For this reason, whenever enough foreign exchange was provided production increased and when little exchange was available, production declined.

- Lack of proper investment in the industry.

- Lack of experts and well-informed advisors in factories.