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Sunday, 22 September 2019

Egypt: Car market in limbo

Ahmed Kotb looks at why car sales have been slow since the beginning of the year

Ahmed Kotb , Friday 26 Jul 2019
Car market in limbo
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Passenger car sales were down by 10 per cent during the period from January to May 2019, according to the July report of the Automotive Market Information Council (AMIC), with about 41,000 cars sold compared to more than 45,000 in the same period of 2018.

Weak sales over the past seven months prompted car dealers to cut prices. “Discounts of up to 20 per cent on various models have been introduced since January,” said the head of sales at one of Cairo’s car dealerships.

The decline in sales is widely believed to be due to calls by a campaign called “Let it Rust” to boycott purchases until car dealerships and distributers lower their profit margins. The campaign is currently urging consumers to wait until September when newer car models are introduced, which might force some dealers to lower the prices of 2019 models further.

The campaign started on social-media networks at the end of 2018 to protest against the high prices of cars in Egypt. Its Facebook page has attracted some two million followers.

“The discounts announced by car dealers on certain models are not yet enough for me to buy the car I want,” said one member of the campaign on the Facebook page.

Price cuts and promotions to entice customers to purchase have continued over the last few months, but the head of sales at one of Cairo’s car dealerships believes the campaign is contributing to the slowdown in sales. “Price cuts on models make more consumers reluctant to buy, as they hope for more price decreases,” he said, adding that the small drops in prices are not necessarily related to the boycott campaign, but could be due to the exchange rate of the Egyptian pound against the dollar.

The value of the dollar against the Egyptian pound has fallen over the last few months from about LE18 against the pound to reach LE16.5 on Tuesday.

“I expect a three to five per cent decrease in the prices of cars in the next few weeks as a result of the continued drop of the dollar exchange rate,” said Omar Balbaa, head of the cars division at the Federation of Egyptian Chambers of Commerce. The dollar rate affects the prices of cars in a direct way, he added.

He also said that the price cuts on many car models lately was normal at this time of year and was not entirely related to the boycott campaign. A slowdown in sales in June was mainly due to the holiday season after the holy month of Ramadan, Balbaa said, adding that he expected a rise in car sales during the next few months.

According to the monthly report by AMIC, total vehicle sales during the first five months of 2019 dropped by 8.5 per cent, recording around 60,000 vehicles, compared to about 63,000 vehicles in the same months of 2018.

Although sales are weak, car imports are steady. According to the Ministry of Finance, the Alexandria Customs, the main port for receiving car imports, released some 7,100 passenger cars worth LE1.97 billion in June.

Sales of imported cars are better than sales of locally assembled vehicles, with a 0.7 per cent increase in the first five months of 2019 compared to the same period last year, according to AMIC. About 25,500 cars were sold this year, as opposed to approximately 25,300 in 2018.

The ministry said in a press statement that about LE500 million was collected as taxes on the imported vehicles, and that an additional LE700 million was saved by importers as a result of the exemption of customs duties that is part of the Egypt-EU Association Agreement.

The agreement, which came into effect in January 2010, promised a 10 per cent annual decrease in customs duties on cars from the EU until they reached zero tariffs in January 2019.

 *A version of this article appears in print in the 25 July, 2019 edition of Al-Ahram Weekly under the headline: Car market in limbo

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