Home Appliances Hit by Fresh Wave of Price Hikes / How Much of Market Inflation Is Due to Currency?

Rising exchange rates, a surge in raw material prices and higher transport costs have brought a new wave of cost pressure to the home appliance industry, pushing up the final prices of domestic products.

Despite the domestication of about 70% in the household appliances industry, the prices of products are still affected by the wave of rising costs; From the jump in the exchange rate and the growth in the price of domestic raw materials such as steel and petrochemical products to the increase in the cost of transportation and the supply of imported parts. But why is the domestic production not spared from the high price and how much is the contribution of each of these factors in the increase in the price of household appliances?

In recent months, the home appliance market has been affected by the simultaneous increase in production costs and the limited purchasing power of consumers; A situation whose reasons, in addition to monitoring sales conditions in the market, requires paying attention to the supply process of raw materials, production costs, and the mechanism for determining the price of products.

In the previous parts of this case, the market situation was examined from the point of view of the supply center activists and the problems faced by the sellers, and the point of view of the Home Appliances Union about the reasons for the price increase, the supply and demand situation, and the problems of the union activists.

In the continuation of this case, the Secretary General of the Iran Household Appliances Industry Association explained about the impact of currency fluctuations, the increase in the price of raw materials and additional costs on the finished price of products and addressed the issue of domestication, dependence on some imported parts and the difficulties of supplying raw materials in the current situation.

He explained about the effect of currency fluctuations, the increase in the price of raw materials and side costs on the finished price of products, and he addressed the issue of internalization, dependence on some imported parts, and the difficulties of supplying raw materials in the current situation.

Nasreen Ojaghi - Secretary General of the Iranian Home Appliance Industry Association stated about the reasons for the increase in the price of home appliances: the price growth of products should be investigated from several dimensions; Because raw materials, exchange rate, salaries, fuel and transportation cost are all effective in the final price of the product.

Citing the reports of the Ministry of Security and Commodity Exchange data, he said: "During the year ending September, the dollar rate based on the Central Bank has increased by 134%, and during this period, the price of polypropylene has increased by 252%, ABS by 223%, hot sheet by 135%, galvanized sheet by 146%, and cold sheet by 145%." In addition to the increase in the price of raw materials, the growth of wages and salaries, fuel and other production costs should also be included in the calculation of the final price. On the other hand, part of the parts required by the industry are supplied from abroad, and the increase in the exchange rate has directly increased the cost of supplying these parts.

The Secretary General of the Iran Home Appliance Industry Association also pointed to the increase in transportation costs and stated that due to the restrictions imposed on sea transportation, the cost of transportation has increased by more than 283% and the sum of these factors has significantly increased the cost of production.

cost pressure on the home appliance industry; Production continues with minimal profit

Ojaghi explained about the pricing mechanism of household appliances: the price of products is determined based on the analysis of costs and the finished price structure, and the manufacturing companies update the price of their products in accordance with the change in production costs. After the recent developments and based on the pricing guidelines, the new prices will be notified to the relevant organizations. However, the decrease in household purchasing power has caused producers to price as much as possible at the break-even level at the current stage.

Why do domestic raw materials become more expensive in terms of currency?

The Secretary General of the Home Appliance Industry Association said about the effect of the increase in the price of domestic raw materials on the price of the final product: the price of a product cannot be separated from the price of raw materials and other production costs, and the increase in the price of steel sheets, petrochemicals and other inputs directly affects the finished price.

In response to the question why, despite the domestic production of steel and petrochemical products, the price of these materials is still sensitive to the exchange rate, he stated: The pricing of these products is based on the mechanism of the commodity exchange, and it should be investigated why, at some points, the price of some domestic raw materials is even higher than the foreign sample.

70% internalization of the home appliance industry

Ojaghi also said about the dependence of the home appliances industry on imports: According to the report of the Ministry of Security, in total, about 70 percent of home appliance production in the country has been domesticated, and in some product groups, the amount of domestication has even reached 100 percent. However, part of the raw materials and parts are still supplied from abroad; An issue that makes this industry vulnerable to import restrictions, currency allocation problems, and increased transportation costs.

The Secretary General of Iran Home Appliance Industry Association said about the possibility of production reduction as a result of import restrictions: companies are currently trying not to disrupt the market and for this purpose they are using warehouse reserves and more difficult and expensive routes to supply materials and parts.