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The government policies are the main challenge, GM Egypt chairman

The chairman of General Motors in Egypt calls for more investment in roads and public transport, and clearer government priorities

Nesma Nowar, Al-Ahram Weekly, Saturday 22 Jan 2011
General Motors
Sales in Egyptian market in 2010 are almost back to their pre-crisis level. GM has a bigger share than 2008.
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Rajeev Chaba is chairman and managing director of General Motors Egypt, and recently his responsibilities grew to cover North African operations.

With almost two decades of experience in the automobile industry, Chaba has assumed senior positions in several countries within General Motors. He is also an elected member of the Executive Committee of the Society of Indian Automobile Manufacturers (SIAM) and a member of the Governing Board of the Automotive Research Association of India (ARAI) for two terms.

The global financial crisis hit Egypt's car industry too. In 2008, the car industry saw record sales of 260,000 units. But in 2009 this had dropped to 205,000 units. By 2010, the automotive industry recovered from 205,000 to 250,000 units.

"When industry sales went from 260,000 to 205,000, trade volume also came down, but our market share kept going up, which means that we did not do as badly as the rest of the competition did. Actually, our market share has kept improving over the past three years," Chaba said, adding that GM's share in the Egyptian market reached 27 per cent in 2010, whereas three years back it was 17 per cent.

"In 2010 we ended up selling 68,000 units, which is an all-time high for us," added to more service and sales outlets. "We did not stop our investment," Chaba adds.

Indeed, Egypt's whole economy has handled the global financial crisis better than most of other markets, Chaba says because the fundamentals of the economy are better than in many places of the world.

Moreover, the Egyptian government helped by way of the taxi replacement programme, which primarily aims to help local manufacturers, "so our Lanos, Hyundai Verna and some other players were helped by that programme. Our factories kept running and we kept producing more cars."

Chaba fears the impact of an agreement between Egypt and the European Union, which would lead Egypt to reduce tariffs annually by 10 per cent on new automobiles imported from Europe as of 2011, aiming at reaching zero per cent tariffs on imported European cars.

"This (agreement) will definitely change the panorama, because European cars may be coming here at zero per cent duty by the 2017-2018 timeframe, so every local manufacturer will have to think in a very smart way about how they are going to be competitive."

GM is already planning to have much sourcing from Asia, looking for products at the right price, which can compete with European cars even at zero per cent duty.

"Actually, most of our products are coming from Thailand, Korea and Japan, so I would guess that more sourcing should be done from China, India and Korea."

Chaba calls on the government to decide on the long-term policy of the country. If it is to be a zero per cent duty country, people will be able to buy cars from anywhere. "In this scenario, local manufacturers cannot survive because our volumes are low, while in an economy of scale, size will not permit having a competitive product cost."

Chaba sees vague government policies as the main challenge to the industry; ambiguity hinders car industry expansion. "When we are producing cars we buy many components locally and much employment gets created by our industry as every car that is being produced and sold creates 10 jobs. Moreover the automotive industry contributes two per cent to this country's GDP."

"There are other challenges related to infrastructure. We need to invest in this area. Governments all over the world spend money on roads and ports," but Chaba is critical of a policy that is primarily focused on cars: "Other local transportation systems are not very encouraging," he adds.

The automotive industry in Egypt, nonetheless, has great potential because the fundamentals of the economy are strong and the government is trying to promote more reform and liberalisation, which is creating more consumption and more purchases.

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