Egypt Auto Industry

AUTOMOTIVE INDUSTRY IN EGYPT 13 pages

1. 2. 3. 4. 5. 6. 7. 8. 9. 1. 11. 12. 13.

Abstract Summary Egyptian Market for Automobies and Auto spare parts !imports" E#porting Market $rofie %oca $roduction %oca Content Current Status and &uture $rospects End 'sers Anaysis Market Access Customs and (T) Issues $ubic tender procedures Import $rocedures * +eguations

T!AI TRADE "ENTER# "AIRO S!ERI$ YE!YA O"OT%ER# 213

Automotive Industry in Egypt

1

Thai Trade Center, Cairo Sherif Yehya

1. As)-a')

The Egyptian market is an important one due to its popuation !some 53 miion", its eading position in Midde Eastern affairs, and its centra ocation bridging three continents Europe, Asia, and Africa/ Egypt4s automotive market is gro6ing due to an increase in car oans, ho6ever the oca industry is unabe to keep up 6ith demand and additiona investment is needed in this vita sector/

%as&' (a)a - .o/ of producers0assembers 26 - Annua capacity 325#  vehices - .o/ of feeder industries factories 338 - Annua production 'S2 655 miion - .o/ of brands 62 - Saes !311" 9# vehices !annuay" - .o/ of registered cars 5.6 miion !311" 2* buses 3* trucks 5* passenger - E#pected .o/ in 31 7.1 miion S+,-'es Egyptian Automobie Manufacturers4 Association !EAMA"/

The eariest beginnings of the Egyptian automotive industry date back to the year 1573/ 8uring the sociaist era, the government pedged to transform the country from an agricutura economy to an industria one, and the first competey Egyptian car 6as produced/ The car soon 6ent out of production, as it 6as unabe to compete 6ith foreign brands, especiay foo6ing the end of sociaism and the move to6ard a more ibera market/ It 6as not unti 159: that automotive giant, ;enera Motors !;M", set up its first assemby pant in Egypt, revoutioni>: vehices in 33B/ This figure rose to 117,79> vehices in 313 a 1>7D increase/ @o6ever, due to the p+/&)&'a/ '0ages s)a-)&g & 211 , production 6as do6n over >1D in 31/ In 31>, Egypt 6as the third argest carproducing market in Africa, after South Africa and Morocco/ I(,s)- Oe-&e Egypt boasts 7 automotive assemby pants of ma=or car brands and is considered the fastest gro6ing automobie market in the Midde East and Africa/ Some :/7 miion vehices are registered in Egypt, >D of 6hich are more than 1 years od/ The market is e#periencing a steady increase of an average 153,333 units per year/ Tota production in 311 6as 1>>,333 units, 6hie imported vehices reached 5,333/ At present, the market for automotive parts and accessories sod to origina euipment manufacturers !)EMs" in Egypt is estimated at F95B miion, 6hie parts and accessories demand for the after-market is estimated at F33 miion/ Many internationay kno6n auto manufacturers, incuding ;enera Motors, 8aimer0Chryser !eep "0e-+ee", Me-'e(es, Pe,ge+), !,(a&, S,,&, %M, and "&)-+e  have estabished assemby pants in Egypt/ Most have aso estabished service centers 6here mechanica servicing is provided, as 6e as body repair and painting/ Automotive Industry in Egypt



Thai Trade Center, Cairo Sherif Yehya

Opp+-),&)&es & A,)++)&e I(,s)- Investments in the automotive sector are estimated at F1/ biion/ %oca vehices production increased in 313 by >BD over 335/ This increase has prompted the need for service centers 6ith modern euipment/ Gno6edgeabe sources in the industry report that the e#port-oriented feeder industries 6i attract the ma=ority of investments/ Many mutinationas are using their base in Egypt as a springboard to penetrate to other Arab and neighboring African countries through e#ports/ An automotive industria 73 miion per year, 6hie their duty rates range bet6een 13D and B3D/ "a- :+as In 311, about B3D of car saes 6ere financed by oans, according to a market eader in car oans in Egypt, 6ith an increase of 73D over 313/ The gro6th in car oans in party reated to the reform of the banking sector, and consoidation of non-performing oan portfoios/ 2. SUMMARY

The Egyptian automotive industry and its feeder industries !parts, service, repair, financia services, etc/" has progressed rapidy in the ast ten years as the number of ocay assembed cars has increased, incuding severa that have begun e#porting/ 'nti 313, the auto industry !saes of ne6 autos and parts, both for factory assemby and the auto market" 6ere reativey bright spots in the overa Egyptian economy/ @eading into 311 ho6ever, a combination of interna and e#terna factors has resuted in a much o6er estimate of activity in this sector/ The fact is, 311 6as a bad year for amost a sectors of the Egyptian economy, and the automotive industry 6as no e#ception/ Saes of ne6 vehices dropped by appro#imatey 3D, and athough many had hoped that financia iuidity probems and a recession-ike environment 6oud improve by the end of the year/ 'nfortunatey, government fisca poicy, protectionism, ta#, customs, and vauation procedures have not yet done much to increase the attractiveness of Egypt as an investment site/ ;oba economic do6nturn and the events of Hanuary :, 311 and the resuting near coapse of tourism 6ord6ide have hit Egypt particuary hard/ In addition, reduced prices for oi and gas !due to e#port to Israe and Hordan under market vaue" and decreased receipts from the Sue< Cana have reduced Egypt4s abiity to obtain hard currency/ &inay, many factors have put strong pressure on the Egyptian pound, 6hich has aready devaued some : percent from mid-311 to mid-31, and is e#pected to devaue at east another 13 percent in the short term/

3. Egp)&a a-e) ;+- a,)++&/es a( a,)+ pa-)s# Ip+-)s

The ma=or market decine in production and saes of ne6 vehices has ed to unprecedented opportunities in the aftermarket/ As is common in difficut economic times, consumers and businesses are deferring the purchase of ne6 vehices, 6hich means that e#penses associated 6ith maintenance and repair of oder vehices is soaring/ There is a serious ack of very high uaity service in Egypt, even occasionay in deaerships that service ony their o6n modes/

Automotive Industry in Egypt

>

Thai Trade Center, Cairo Sherif Yehya

Egypt Import Statistics

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4. Ep+-)&g According to the European $artnership, Egyptian products are e#pected to be ao6ed into Europe free of custom duties  and European products into Egypt  but ony after a transition period of 13-1 years/ Automotive industriaists beieve that Egypt shoud make use of those years and of the support offered by Europe to deveop its industry and to e#port as much as possibe/ Manufacturers are said to be ess enthusiastic about e#porting than the Egyptian government is, ho6ever/ Most Egyptian-made products ack the uaity to compete in Europe, and e#cuding Egypt, Common Market for Eastern and Southern Africa !C)MESA" member countries together have a market of ony 73,333 cars a year/ Aso, e#cept for Egypt and Sudan, a other C)MESA member countries are right-hand drive, 6hich 6oud reuire an adaptation of vehices that is not =ustified by the si,113,137/33

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5. MARBET PRO$I:E The foundation of Egypt4s nationa automotive industry 6as aid in 15:5, 6hen the government signed a contract 6ith a ;erman firm for the oca manufacture of trucks and buses/ That contract stipuated that a ne6 company 6oud be estabished in Egypt to manufacture appro#imatey haf of the components for each vehice and to assembe the E/ Nas- A,)++)&e Ma,;a'),-&g "+pa =NAS"O?  6as vehices/ To this end, estabished in 1571, and its first production ine 6as set up in (adi @of near @e6an, =ust south of Cairo/ .ASC) soon thereafter forged additiona contracts 6ith European companies/ The first 6as 6ith the Yugosav firm IM+ to produce tractors the second 6as 6ith &iat of Itay to produce passenger cars and the third 6as 6ith the ;erman Company ?umhardt to manufacture trucks/ .ASC) began to impement these contracts in 157, but 6ar and economic hardships Egypt e#perienced in the 1573s and 153s hampered the gro6th of feeder industries and reduced .ASC)4s budget for e#pansion/ &inancia pressures forced .ASC) to give priority to its truck and bus production, especiay in terms of increasing oca content/ This 6as done at the e#pense of its passenger car pro=ect, 6hich had not deveoped at the same pace/

Automotive Industry in Egypt

:

Thai Trade Center, Cairo Sherif Yehya

13/5

.ASC) caims that 6ithin ten years of its aunch, it 6as producing appro#imatey >333 trucks and 1733 buses per year 6ith 3D oca content/ In a peak year in the 1573s the company assembed 1,333 passenger cars 6ith >3D oca content/ .ASC) 6as the first and, at that time, the ony component4s production company in Egypt, and the monopoy position it en=oyed enabed it to profit substantiay/ @o6ever, .ASC)4s situation took a do6nturn in 15B 6hen the government embarked upon poicies that ao6ed the importation of foreign cars  6hich had previousy been banned  into the oca market/ Mean6hie, government4s price-fi#ing poicies for pubic sector industria products continued despite of rising costs/ The government directed .ASC) to focus its passenger car assemby operations on one mode, the &iat0.asr 19/ In 155B, under the government4s privatiD for buses, 73D for minibuses, :3D for tractors, and around B:D for passenger cars/ The company has assets 6orth more than F933 miion and is a ma=or customer for some >>1 oca suppiers, of 6hich B are from the private sector/ .ASC)4s poicies are no6 based on t6o ob=ectives producing the &iat modes 8ogan and Shahin, and eventuay getting a suitabe bid from a foreign automotive manufacturer to fuy privati>9 factories empoying around 3,333 6orkers 6ith an annua production of FB:: miion, according to the Egyptian Automobie Manufacturing Association !EAMA" statistics/ Mutinationa companies assembing vehices in Egypt have contributed a great dea to the deveopment of the feeder industries by pushing oca suppiers to reach higher standards of uaity/ EAMA foresees that car manufacturers 6i eventuay ocaiT-a'+ Assember of the $oish and C

Thai Trade Center, Cairo Sherif Yehya