Prospects for electric vehicles

Khaled El-Ghamry, Tuesday 15 Oct 2024

With electric vehicles representing only a tiny fraction of auto sales in Egypt, experts tell Khaled El-Ghamry how to boost demand

Prospects for electric vehicles

 

Electric vehicle (EV) sales currently make up just 0.1 per cent of sales in the automobile market in Egypt, with people hesitant about making a purchase due to the novelty of the idea of having a car that is electrically charged.

 In general, the passenger cars sector has also been suffering immensely, with sales of private fuel-powered cars dropping by 70 per cent from 2021 to 2024, according to Alaa Al-Sabaa, a member of the Automotive Division of the Federation of Chambers of Commerce.

Al-Sabaa attributed the declining sales to soaring car prices and the weakening of consumers’ purchasing power. Additionally, the prolonged suspension of the digital pre-shipment registration system has severely impacted the import of both traditional and electric vehicles, he said.

Although the system has resumed operations for authorised agents of global brands, a new state directive mandates that importers must submit a request detailing the vehicle’s brand, quantity, and the name of the importing company.

Upon approval, a code number is issued, allowing the importer to proceed with registration on the digital platform. This additional step has introduced further complexities to the import process for all vehicles, whether electric or fuel-powered, as well as their components, Al-Sabaa added.

EVs face many challenges, with their numbers in Egypt hovering around 5,000. “This is largely due to the underdeveloped infrastructure of the charging station network, despite the state’s efforts to expand it across the country,” Al-Sabaa commented.

“The limited capacity of charging stations in Egypt, which reaches a maximum of 48 Kilowatts per hour, also pales in comparison with their European counterparts, where stations boast capacities up to 150 Kilowatts per hour. This disparity results in longer charging times in Egypt, ranging from 30 minutes to two hours, depending on the station’s output and the car’s battery size.”

“Moreover, several companies investing in the development of charging infrastructure have halted further investments. This slowdown is largely due to the inability to generate the anticipated returns, stemming from a sluggish capital cycle. The expected rise in EV numbers has not materialised, and the low charging tariff has compounded the problem.”

As a result, the prospect of manufacturing EVs in Egypt remains distant, primarily due to weak sales. Large-scale production requires approval from parent companies, which is contingent on securing attractive export contracts, Al-Sabaa noted.

To accelerate EV sales, the state must provide greater consumer support, he added. While initial efforts, such as reducing licensing fees, are a step in the right direction, further incentives are needed, including financial support for buyers, tax exemptions, and discounted land allocations for building manufacturing plants, which would all help attract investment.

Al-Sabaa spoke about EV importers operating outside the authorised agent network, often referred to as the “grey market”. These importers face various challenges, including difficulties registering on the advance cargo information declaration (ACID) number system, a crucial part of the customs-release process for new vehicles entering Egyptian ports. The 19-digit number is generated by the Egyptian customs platform Nafeza.

Authorised dealers have also distanced themselves from providing maintenance or honouring warranties for EVs purchased outside their networks, citing non-compliance with Egyptian specifications. This is an issue for consumers, especially in cases where spare parts are unavailable or major technical malfunctions occur.

Automotive expert Ahmed Al-Mazahi said that “there are no substantial barriers preventing the authorised agents of major companies from offering and promoting EVs in Egypt. However, their efforts remain limited. Demand for EVs in Egypt is promising, as evidenced by the success of the grey market, which has managed to achieve notable sales outside the purview of official dealerships.”

In fact, the grey market has played a significant role in shaping the EV field, recording growing sales over the past three years, often outpacing the performance of authorised agents.

However, the issues with the ACID registration system may disrupt the momentum of EV sales for an uncertain period. This comes at a time when official agencies are offering only a limited range of EVs, insufficient to meet the real demand for this type of cars in the country.

One of the key factors behind the lower prices in the grey market is its strategy of maintaining low profit margins, ensuring competitive pricing for imported vehicles. This approach has contributed to the expansion of grey market sales.

Al-Mazahi believes that authorised agents “must boost electric car sales in Egypt by expanding their portfolios to include more models at their agencies and secure new partnerships with emerging Chinese EV brands, which have achieved impressive global sales over the past five years.”

“Establishing strategic partnerships with the parent companies of these brands to assemble vehicles locally in Egypt, and potentially expanding these agreements to include export activities under the supervision of the parent companies, could enhance the market.”

In turn, the government should encourage investment in charging stations along major roads and diversify charging machines to accommodate a wide range of brands.

Increasing EV sales has several advantages. From an economic perspective, EVs reduce the dependence on traditional fuel, lowering the national fuel import bill and saving fuel costs for consumers, electricity being considerably cheaper than fuel. Moreover, EVs provide radical savings in operating expenses, particularly when compared to the periodic maintenance costs associated with fuel-powered vehicles.

In extremely hot countries, EV batteries encounter issues, but they have proven to be well-suited to Egypt’s climate, Al-Mazahi stated. “By monitoring the experiences of EV owners in Egypt over the past five years, the issues have been minimal and do not pose any significant barrier to wider adoption. Moreover, with rapid technological advancements, EV batteries are increasingly becoming resistant to high temperatures.”

Ahmed Abdel-Hamid, marketing manager of the Shahin Company, one of Egypt’s key manufacturers of EV chargers, said that some Chinese EVs do not conform to the European standards which Egypt follows. As a result, those who purchase EVs with Chinese charging specifications have to use a converter to adapt the charging system.

The converter may be neither internationally approved nor reliable, posing risks to the battery and the car itself. This is why authorised agents in Egypt refuse to offer warranties or maintenance services for these vehicles, he explained.

However, Chinese companies that produce EVs with European charging protocols have authorised agents in Egypt, providing full warranty, regular maintenance, and spare parts for these vehicles. Abdel-Hamid stressed that consumers should be well-informed about the different types of chargers, their functions, capacities, and costs to prevent charging interruptions during travel.

Egypt is working on localising the charger-manufacturing industry and expanding the network of charging stations nationwide to prevent congestion at charging stations and encourage more EV sales.

At present, the cost of charging ranges from LE1.9 per Kilowatt for slow charging to LE3.75 per Kilowatt for fast charging.


* A version of this article appears in print in the 17 October, 2024 edition of Al-Ahram Weekly

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