Egypt’s vehicle market will see the introduction of four or five new models in 2025, two of which will be produced when two new factories are established in Egypt. The remaining models will be assembled on production lines at existing factories, reports Ahmed Abdel-Hafez.

One of the new factories will be established by the Al-Qasrawi Group, the other by the Ezz Al-Arab Group in partnership with Al-Sewedy and Indonesia’s Proton. Existing manufacturers such as Nissan also plan to introduce new models, including an economy-class vehicle of Indian origin, which will be assembled on the company’s local production lines.

Chinese automaker Exeed has also begun assembling vehicles in factories located in 6 October City, according to company statements.

The expansion in car manufacturing is part of Egypt’s national automotive industry strategy for 2024-2030, which aims to achieve an annual production target of 400,000 to 500,000 vehicles. It envisions exporting 25 per cent of this output, or 100,000-125,000 vehicles annually, to generate $4 billion in revenue per year and boost Egypt’s position on the global vehicle manufacturing map.

A major focus of Egypt’s automotive strategy is electric vehicles (EVs), with plans to venture into local EV manufacturing in 2025 through coordinated efforts with international companies to transfer their production lines to Egypt. Efforts also extend to integrating EVs into public transportation systems, including e-taxis, through partnerships between Chinese companies and the Al-Nasr Automotive Company.

Al-Nasr plans to roll out its first trial production of passenger cars by mid-2025, said a statement in October.

According to Ahmed Bahaa, an automotives market expert, Egypt’s best prospects for expanding its automotive production lie in EVs rather than traditional fuel- or gas-powered cars.

EVs are simpler and less complex than internal combustion engine vehicles and primarily rely on battery technology, he said. The other components of EVs are also easier to manufacture locally.

Egypt, Bahaa said, has extensive experience in producing commercial vehicle components, including small and medium transport vehicles and buses of various sizes.

The state has proven its capability to establish a market and drive demand for EVs, drawing on its success in creating a market for natural gas-powered cars through initiatives such as the replacement of old vehicles, loans supporting conversions from petrol to gas, and the establishment of fuel stations and related services, he added.

He recommended that Egypt focus on maximising its plans for automotive cities by concentrating on the production of essential components shared across all vehicle models. “This will position Egypt as a hub for supply chains and attract major manufacturers to operate in these automotive complexes,” Bahaa said.

The primary challenge for the automotive industry, he said, is to ensure that it is up to the task of mass production. He explained that using production lines to produce small quantities drives up costs, leading to higher prices.

Bahaa also sees the restrictions on car imports as an opportunity to revitalise local factories, which can meet domestic demand with locally assembled vehicles.

In contrast, Hussein Mustafa, former executive director of the Automobile Manufacturers Association, argued that “opening the door to imports does not conflict with fostering local production.”

He referenced 2014 as a peak year for sales when 300,000 cars were sold in Egypt 120,000 of which were locally assembled.

Similar sales patterns were seen in 2022 and 2023 despite the decline in total sales volumes, Mustafa said, insisting on the importance of imports to meet diverse consumer needs.

He pointed out that Egyptian factories operate at less than half their production capacity, even during years of significant market growth. However, some factories have turned to exports, such as Nissan, which recently announced the export of 6,000 vehicles since operations started in its factory in Egypt.

The Egyptian car market is extensive and diverse and requires a harmonious balance between local production and imports, Mustafa said. Most local factories produce economical passenger cars, while there is also a demand for luxury vehicles that are not assembled domestically.

Although a single high-end model is assembled locally, there remains a considerable market demand for other models.

Mustafa is optimistic about the new batch of models that will be introduced in 2025, expecting that since they will all be in the economical passenger car segment, a price balance will be seen in the market. He also believes the new models will enhance supply, a critical factor in regulating prices.

Alaa Al-Sabaa, a member of the Automotive Division of the Federation of Chambers of Commerce, said it was too early to judge the future of the market based on the recent developments. The process of opening new factories and increasing the capacity of existing production lines to generate jobs and increase local and foreign investments should be assessed later on after determining supply and demand and pricing mechanisms, he said.

“At present, there is not strong demand in the market, nor are there gaps between supply and demand. In 2023, approximately 60,000 locally assembled cars were licensed, while 46,000 cars had been licensed by October 2024. We anticipate matching last year’s rate by the end of December,” he said.

Al-Sabaa believes the core challenge lies in achieving quantitative production, since as production scales up, costs associated with operation, energy, labour, components, and raw materials decrease, thereby lowering prices. Conversely, limited production volumes drive prices higher.

He predicts that the local market can absorb no more than 5,000 cars in the new models, saying that producers should eye exporting their vehicles to increase production volumes. He also called for the implementation of the national automotive strategy and adhering to regular schedules for distributing export incentives, which would help factories lower production costs and enhance their competitive edge in global markets.

He also stressed the need for coordination with the original manufacturers of the models to be exported from Egypt. Exporting without this could lead to competition with the foreign partner, which collaborates on local manufacturing and provides technical expertise.

If the foreign partner sees economic viability and enhanced competitiveness for its models in global markets through local manufacturing, it is likely to support the initiative, he added.

Citing the Moroccan model of vehicle manufacturing, Al-Sabaa said its success was based on mass production. He noted that a major French automotive maker had achieved competitive pricing by manufacturing in Morocco, enabling exports to Egypt, Saudi Arabia, Jordan, and European Union countries.

Morocco produces 590,000 cars annually of a single model, most of them destined for export. It also produces other models for export, benefiting from joint customs agreements and compensating for Morocco’s limited domestic purchasing power, low demand, and small population.

Morocco’s automotive industry now generates dollar revenues comparable to Egypt’s Suez Canal, Al-Sabaa concluded.

* A version of this article appears in print in the 19 December, 2024 edition of Al-Ahram Weekly