Egypt auto industry cautiously optimistic about future

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The first Chevy Move N300 microvan, a re-badged Wuling Rongguang, rolled off assembly line in GM’s factory in Egypt in May this year. It is built from complete-knock-down (CKD) kits provided by SGMW, a three-way joint venture between SAIC, GM, and Wuling. Photo – Chinaautoweb.com

Egypt’s auto retail sector, one of the largest in the Middle East and North Africa (MENA) region, has been hit hard by dwindling sales due to the recent political instability and economic slowdown, but pent-up demand is shoring up recovery, the Oxford Business Group said in its report on Thursday.

Quoting local press sources, the report said that overall vehicle sales were up 4.4% year-on-year in May. According to the Automotive Marketing Information Council (AMIC), two-thirds of the 15,465 units sold were passenger cars. The council also said that pick up of commercial vehicles’s sales, especially that of trucks and buses, was the key growth driver. Bus sales were up 30.7% to 1358 units and truck sales rose 29.6% to 3340 units. The report said it will have a multiplier effect on the manufacturing sector, which is also coming out of the shadows.

The biggest independent carmaker in the Middle East is GB, which manufactures, assembles, imports and distributes vehicles for international firms such as Hyundai, Mitsubishi, Volvo and Mazda. It led the passenger car market with a 34% market share in the first five months of the year.

According to AMIC, around 40% of passenger cars sold in Egypt last year were assembled domestically with a number of major brands like General Motors, Mercedes, Hyundai, BMW and China’s Chery, assembling their vehicles in the country. High import taxes on foreign automobiles has forced some companies to import the knocked-down kits and put together locally. Denounced by some economists as protective, the policy has helped the country establish a components industry, which benefit from low labour costs, low overheads and geographical location.

Consumers Careful

Egypt’s political upheaval, which started in January 2011, has forced many consumers and businesses to defer making hefty purchases and wait for a more secure climate before buying. According to the IMF, the country’s economic growth dropped sharply by around 1.8% last year. The growth rate was further contracted by 4.3% in the first quarter, the report noted.

According to Hesham Ezz Elarab, President of the Ezz Elarab Automotive Group of Companies, said some automobile firms focused on securing their stockyards rather than production, slowing or freezing distribution, six months after the start of the revolution.

“The month of May showed signs of improvement in the market but consumer confidence will not return until elections take place and unified government is in place,” Khaled Youssef, head of the automotive division at Egyptian International Motors, told OBG. “This will be critical to getting the automotive sector back on track. With a population of 80m and only a small proportion owning cars, the potential for growth is vast.”

Many automobile industry analysts expect sales to rise by up to 10%, in spite of GDP expansion remaining low. Egyptian auto industry received a big boost in February when GB inked a deal with China’s Geely for the establishment of a CKD assembly operation in the country. The factory aims to export across North Africa – further strengthening Egypt as an automobile manufacturing base.

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