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Thursday, 17 October 2019

Drop in car sales in Egypt

Weak purchasing power accompanied by a boycott campaign caused car sales to fall in February

Nesma Nowar , Friday 12 Apr 2019
Cars
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Egypt’s vehicle sales dropped by 5.2 per cent year-on-year in February to stand at 10,857 vehicles from 11,454 last year, figures from the Automotive Information Council (AMIC) showed this week.

Passenger car sales fell nine per cent year-on-year in February to reach 6,980 units. Bus and truck sales, meanwhile, increased by four per cent and three per cent year-on-year, respectively, according to the AMIC.

The decline has been attributed by some observers to the social-media campaign “Let it Rust”, which calls on people to stop buying cars to curb price rises.

The campaign was launched towards the end of 2018 to protest against the high prices of cars in Egypt.

It went viral in early January as consumers continued to wait for a decrease in automotive prices following the full elimination of custom tariffs on European cars within the framework of the free-trade agreement with the EU that went into effect at the beginning of the year.

Since its inception, the campaign has garnered one and a half million supporters.

Although the full elimination of tariffs on EU cars has caused prices to go down, campaigners say they need to go lower. The campaign also demands that regulations be put in place on the rights of customers and car-dealers, including on fixed margins for dealerships, distributors and vendors.

Following the tariff elimination, prices for non-luxury passenger vehicles from the EU dropped by between LE20,000 and LE40,000. Luxury car prices decreased by around LE100,000 to LE150,000.

Supporters of the campaign, however, are not satisfied with these decreases, saying that the campaign will continue until a fair price and profit margins are reached.

One employee at one of Cairo’s car-dealerships said that the boycott campaign had played a role in the decline in sales because of its outreach. He added that the prices of some cars had indeed gone down.

He also said that car sales had been hit hard by the devaluation of the Egyptian pound in late 2016 as it had slashed incomes in the country by some 50 per cent. He said the weakened purchasing power of many people had negatively affected the car market.

Noureddin Darwish, deputy head of the Cars Division at the Cairo Chamber of Commerce, attributed the decline in sales to the weakened purchasing power of customers. He said that this had not only affected the car market, but had impacted other commodities as well.

He added that the car market had been seeing a drop in sales since October 2018 and since the announcement of the elimination of custom duties on cars imported from Europe.

“When the price of any commodity goes down, customers hold back in the hope of further price decreases,” Darwish told Al-Ahram Weekly. “This is the main reason behind the drop in car sales over the last few months,” he added.

He said that the “Let it Rust” campaign had played a role in the sales drop, but it had not been the main reason.

There was stagnation in the Egyptian market in general, he said, including the car market. Car sales in March had begun to rebound, but the figures were below expectation, he added.

Raafat Masrouga, honorary president of the AMIC, said in February that the “Let it Rust” campaign had contributed to a slowdown in car sales by 35 to 40 per cent in January and February.

He said that the target had been to sell 20,000 vehicles after the full elimination of the custom tariffs, but fewer than 12,000 cars had been sold in January.

Egypt’s car sales fell 42 per cent month-on-month in January to 11,460 vehicles from 19,804 in December, according to data from the AMIC.

January’s sales, meanwhile, were up 10.8 per cent year-on-year, but that was well below the average monthly year-on-year increase of 39.3 per cent from 2017 to 2018.

* A version of this article appears in print in the 7 April, 2019 edition of Al-Ahram Weekly under the headline:  Drop in car sales

 

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