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Coronavirus threats to cars

Experts worry that improved passenger car sales in Egypt could suffer on the back of the spread of the coronavirus, reports Ahmed Kotb

Ahmed Kotb , Tuesday 10 Mar 2020
Coronavirus threats to cars
photo: Reuters
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The latest report published by the Automotive Marketing Information Council (AMIC) shows that total sales in the car market in Egypt rose by 28.98 per cent in January.

Close to 14,000 vehicles were sold in the first month of 2020, compared to around 11,500 in the same month last year. According to AMIC, automotive sales had gone down by 5.7 per cent in 2019, compared to the previous year.

Passenger car sales rose by 10 per cent in January after 10 consecutive months of decline, with 8,747 cars sold, almost 1,000 vehicles more than in January 2019. Bus sales also surged by 180 per cent, with 2,598 buses traded in January 2020, compared to 926 in 2019.

Truck sales, however, went down slightly by 2.5 per cent, with around 2,500 vehicles sold in January.

The AMIC report stated that sales of locally assembled cars had increased by about 19.4 per cent in January to around 6,600 cars. Imported cars recorded a 22.5 per cent increase, with the sale of a little over 7,000 vehicles, compared to slightly less than 6,000 cars in January 2019.

Alaa Al-Saba, member of the Cars Division at the Cairo Chamber of Commerce, said that the appreciation of the pound against the dollar in recent months helped lower the prices of many car models, thus leading to improved sales in January. The Egyptian pound has appreciated steadily by about 13 per cent since early 2019.

According to the Focus2move agency, a specialist in the global automotive industry, the Egyptian car market has been in trouble over the past few years due to the high prices of cars that followed the depreciation of the Egyptian pound, the increase in interest rates, and increased fuel prices.

However, it said that car sales were predicted to continue to grow until 2025, after the noticeable declines during the past four years, but that the recovery would be modest.

Al-Sabaa was not worried about the effects of the spread of the coronavirus on the Egyptian car market. It would take months before it could have an effect because there was a stock of imported and locally assembled vehicles to supply the market demand for the next few months, he said.

However, Al-Sabaa said that Chinese car prices would be the first to increase as a result of the stalling of Chinese car production. “Many international car companies have decided to temporarily withdraw employees from their factories in China and suspend their operations,” he said, adding that there would likely be a shortage of Chinese-made cars and other cars assembled in China as well as car parts.

“This is expected to lead to increased prices worldwide,” he said.

The precautionary decisions taken by companies to combat the virus have affected global car production, since China supplies parts needed by car factories worldwide, and many auto companies across the country have closed their doors as part of a nationwide shutdown. Many automakers have also temporarily suspended their production outside China, such as in South Korea and Japan.

According to the World Economic Forum (WEF) website, China is the world’s biggest car market, and Wuhan, the city at the centre of the coronavirus outbreak, is known as a “motor city” for being home to many automotive factories including General Motors, Honda, Nissan, Peugeot, and Renault.

Wuhan accounts for about 50 per cent of the total production of Honda in China alone.

In 2019, the WEF added, Hubei province, of which Wuhan is the capital, was the fourth-largest car producer in China, with about 10 per cent of the country’s car-making capacity and producing 2.24 million vehicles.

The China Passenger Car Association (CPCA) reported a 92 per cent decrease in car sales in China in the first half of February, and the Association recently forecast a 10 per cent decline in sales for the first half of 2020 and a five per cent decrease by the end of the year.

Al-Sabaa pointed out that the effect of the slowdown in China was not only because of the stoppage of its factories, which represent about a third of the world’s production, but also because the country delivers more than 40 per cent of components to car factories around the world.

 

*A version of this article appears in print in the  12 March, 2020 edition of Al-Ahram Weekly

 

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