PRLog (Press Release)– May 07, 2011– Activity across production, sales and trade in Egypt's automotive market was easily overshadowed by anti-government unrest triggered in late January 2011, which eventually saw Hosni Mubarak's government toppled. Car sales were significantly stymied as local banks restricted car loans, which generate over two-thirds of sales in the country. Political uncertainty in the country, along with lenders' concern over dampened demand and disruptions to wages, is reflected in BMI's expectat acura ion of just a 7% year-on-year (y-o-y) jump in sales, to 330,309 units, in 2011.
Moreover, BMI expects production to flatline in 2011 at 158,651 units, broadly steady with the previous year. Japan's Suzuki Motor announced that it restarted vehicle production at its plant in Egypt after a week-long suspension in February 2011 amid violent political protests. However, other carmakers chose to keep their facilities closed and even evacuated expatriate employees, creating uncertainty for North Africa's largest vehicle production hub.
General Motors Company, which makes the Chevrolet Aveo and Spark small cars and the Opel Astra sedan in Cairo stopped production and removed its non-Egyptian staff. Germany's BMW took similar action at its plant in Cairo, where it assembles the X3 and X1 SUVs and 3, 5 and 7-Series sedans. O buick ther companies such as Nissan Motor stopped all business travel to the country and took a 'wait and see' approach. Nissan produces around 10,000 units per year of the X-Trail SUV and pick-up trucks, which accounts for around 10% of the country's total output.
The political upheaval is a massive setback for the autos sector. The Industrial Development Authority (IDA) recently proposed providing incentives to encourage investment in local production, which it says will help boost the industry and create jobs. BMI believes it would also help Egypt compete for new investment as other North African countries such as Morocco and Algeria look to increase production.
While it will take time for Morocco and Algeria to catch up with Egypt at its current rate of output, any further expansion of auto output in the country is jeopardised by the political uncertainty. This coul bmw d pave the way for these two countries to win investment - particularly with small-scale production beginning in the Gulf Co-operation Council.
Egyptian automaker GB Auto argued in early March 2011 that commercial vehicle sales would be hit by declining tourism and a general economic downturn, which will hold businesses back from fleet purchases. BMI also believes that the change of administration following widespread unrest during the month could disrupt industry policy, which had previously been positive for the autos sector. The taxi scrappage programme, which aimed to take 50,000 old taxis off the roads by the end of 2010, contributed to double-digit growth for several major brands. A similar scheme for small buses was due to be launched in 2011, but this is now uncertain due to the political situation.
Earlier in January 2011, the Ministry of Finance was considering a plan by the country's Industrial Development Authority (IDA) to award incentives for local vehicle production. While the IDA sees the proposal as a way to boost the industry and create jobs, BMI believes it is also a way of competing for new investment as other North African countries such as Morocco and Algeria look toward domestic production.
Under the plan, the IDA will allocate EGP1.5bn to industry incentives over the next 10 years. In order to qualify, carmakers would need a local content level of at least 45% of their vehicles. IDA's chairman, Amr Assal, hopes the incentives, of around EGP7,000-8,000 per car, will not only reward those carmakers that already have a high localisation level, but also encourage those who import the majority of parts to switch to local suppliers. A long-term goal is not only to increase industry output but also create new jobs.
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