Egypt: Zero customs on Turkish cars

Safeya Mounir , Saturday 11 Jan 2020

Will lifting custom duties on vehicles imported from Turkey affect Egypt’s automobile market?

Zero customs on Turkish cars
photo: Reuters

In 2005, Egypt and Turkey signed a free-trade agreement (FTA) that came into force in 2007. According to this FTA, custom duties on vehicles imported from Turkey would be subject to a gradual decrease of 10 per cent a year until they were cancelled completely by the beginning of 2020.

The repercussions of this zero-customs decision, now applied, have yet to be seen in Egypt’s automobile market. The FTA applies to cars manufactured and assembled in Turkey, such as the Fiat Tipo, Renault Megane, and Toyota Corolla.

“Some 10 to 12 per cent of the Egyptian automobile market is dedicated to vehicles imported from Turkey,” said Alaa Al-Sabaa, a member of the Automobile Division at the Egyptian Federation of Chambers of Commerce.

Turkish car prices are expected to drop by 2.5 to three per cent now that the zero-customs provision is in place.

Egypt’s automobile market witnessed a slowdown throughout 2019 for reasons that included the “Let it Rust” social-media campaign that advised people to refrain from buying vehicles until they were offered at a fair price. Sales regressed by three per cent, compared to 2018.

Al-Sabaa believes the automobile market will receive a breath of fresh air in the new year thanks to the dollar’s drop in value to LE16 and the Central Bank of Egypt’s decision to increase the loans available to individuals for consumption purposes in order to facilitate higher purchases.

Khaled Saad, secretary-general of the Egyptian Automobile Manufacturers Association, expects the Toyota Corolla to be in demand among consumers. The brand is popular among Egyptians in the primary and secondhand markets, he noted.

Automobile dealers will compete further to attract consumers, offering further reductions to increase their sales, Saad added, anticipating car sales increasing by 10 to 15 per cent over 2018.

According to the Automotive Information Council (AMIC), 179,000 vehicles were sold in Egypt in 2018, including private cars, buses, and public transportation vehicles.

From January to November 2019, 161,100 vehicles were sold, down from 166,700 during the same period in 2018. Private vehicle sales registered a nine per cent regression at 112,900 cars, down from 123,500 in 2018, it reported.

Media reports say that competition between automobile distributors has led to a decrease in the prices of Hyundai cars, as well as of the Fiat Tipo and Toyota Corolla, by between LE10,000 and LE25,000.

Dynamics Auto, the agent of the Italian company Fiat in Egypt, has announced a reduction of LE18,000 to LE25,000 on the price of a new Fiat Tipo, for example.

Saad said vehicle prices were expected to drop by between LE15,000 and LE20,000, adding that while the tax on imported cars from Turkey will be cancelled, the value-added tax and development fees will remain in place.

Cars with a capacity of less than 1,600 cc are subject to 14 per cent value-added tax, one per cent schedule fees, and three per cent development fees.

The coordinator of the “Let it Rust” campaign, Mortada Al-Shazli, said the anticipated drop in the prices of imported Turkish cars would increase the purchasing power of consumers who would be able to buy vehicles of higher calibre. 

Cars imported from Turkey should be offered at lower prices than they are now in the market as a result, he said, but he added that automobile dealers were counting on consumer demand for Turkish cars, minimising the chance of further price reductions.

According to dealers, the Toyota Corolla has between eight and nine per cent market share in Egypt, while the Fiat Tipo and Renault Megane have 12-13 per cent and two to three per cent, respectively.

*A version of this article appears in print in the 9 January, 2020 edition of Al-Ahram Weekly.

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