High car prices persist in Egypt: The 'Let it rust' campaign jump starts debates

Safeya Mounir , Thursday 31 Jan 2019

A social-media campaign against high car prices has been causing ripples in the Egyptian market


“Let it Rust”, a campaign started on social networks towards the end of 2018 protesting against the high prices of cars in Egypt, went viral in early January as consumers continued to wait for a decrease in automotive prices following the full elimination of custom tariffs on European cars within the framework of the free-trade agreement with the EU that went into effect at the beginning of the year.

As soon as the campaign’s page was published on Facebook, some 200,000 people joined and 1,562 posts were created within the next few days, reflecting the quick engagement of the public with the campaign. It calls for a boycott on buying new cars to put pressure on dealers to lower their prices, even if cars in storage are left to rust.

The campaign is also demanding that official bodies apologise for their “unprofessional and immoral violations” with regard to the car market. It demands that regulations be put in place on the rights of customers and car dealers, including on fixed margins for dealerships, distributors and vendors.

The target is not to close car dealerships or to cause them financial losses, the campaign says, since it recognises the right of dealerships to trade and make profits acceptable to both parties in transactions.

However, if its demands are not met, it will find other ways of putting pressure on the dealerships to ensure that customers are not exploited, including in after-sale transactions, it says.

The founder of the “Let it Rust” campaign, Mortada Al-Shazli, said that “car sales have been in a recession since July. The full effect of the campaign appeared in January with a complete halt in car sales.”

A number of imported shipments are stuck in port at Alexandria because vendors have refused to buy them from agencies, he added. Some vendors have even requested a 50 per cent cut in profits from car dealerships after the public stopped buying cars.

Al-Shazli expects car vendors to lower their prices during the second half of 2019 and before the release of 2020 models. “They will have to lower their prices even if it is against their will,” he stated.

The campaign has released posts on Facebook comparing the differences in the prices of cars sold in Egypt and in other countries in the region, even if the cars concerned are from the same manufactures.

The comparisons show dealerships apparently pocketing what in some instances were a quarter and sometimes as much as the whole of the price of the vehicle.

For example, one car from a leading French brand costs LE115,000, but a dealership sells it for LE250,000 in Egypt. A Korean-branded car is sold for LE425,000, whereas its actual price should be LE267,000, according to the campaign.

Alaa Sabaa, a member of the Cars Division at the Cairo Chamber of Commerce and the owner of a Chinese car dealership, said comparing car prices in Egypt with their counterparts in the Gulf was not a useful strategy.

Dealerships in Egypt have to bear the costs of shipping, transportation, and maintenance centres, he said, amounting to 15 to 20 per cent of the car’s price.

Sabaa said he expected the recession in the car market to last until April. Slowing car sales have been noticeable since October because people had been anticipating a drop in the prices of new cars in January with the elimination of custom tariffs on imported cars from Europe and the full implementation of the free-trade agreement with the EU, he added.

“People expected a 50 per cent decrease in car prices, which didn’t happen, and so the halt in sales continued.”

Sixty per cent of the vehicles market in Egypt is dedicated to cars and 40 per cent to buses and microbuses, Sabaa said. Seventy per cent of the cars sold average between LE200,000 and LE300,000 in price, and the remaining 30 per cent is on cars ranging in price from LE500,000 to LE2 million.

180,000 cars were sold in Egypt in 2018 despite the slow-down in sales in the last three months of the year, he said.

The Citizens Against Rising Prices Association (CARPA), a pressure group, has sent a statement to the prime minister, the minister of trade and industry, and the head of the Egyptian Competition Authority demanding their “quick intervention to stop the monopolistic practices of car dealerships in Egypt”.

“The ‘Let it Rust’ campaign has achieved effective results through boycotting campaigns, affecting a monopolistic marketplace which is limited with the help of government decrees to 20 dealerships that reap huge profits,” the CARPA statement said.

It called upon the Egyptian Competition Authority to prepare detailed studies and find solutions to end monopolies harming consumers. It demanded government intervention to stabilise the market and protect the jobs of those working in the car-import sector.

Raafat Masrouga, honorary president of the Automotive Information Council (AMIC), said that sales in the car sector had dropped by 50 to 60 per cent as a result of the “Let it Rust” campaign.

Statements by car dealerships over the last few months that car prices would not decrease after eliminating custom tariffs on European cars had “created mistrust towards the car vendors,” as many people thought distributors would now make extra profits, he added.

Head of the Egyptian Association of Car Vendors, Osama Abul-Magd, said car dealerships had sometimes exaggerated prices and that no regulations governed pricing mechanisms and maintenance costs.

It was in the interest of vendors for car prices to drop because this would mean the sale of more cars, he said.

He requested the intervention of the Consumer Protection Agency and the fixing of a reasonable profit margin for dealers. The agency should also halt extra charges levied on customers wanting early delivery of their cars, he said.

* A version of this article appears in print in the 31 January, 2019 edition of Al-Ahram Weekly under the headline: Let them rust?  

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