Egypt’s Automotive Industry Strategy, in the making over the past couple of years, was recently approved by the cabinet and reviewed by the president on 9 March, clearing the way to its publication soon.
The strategy was jointly prepared by the private sector and all relevant ministries and government bodies through the work of seven subcommittees representing the ministries of military production, interior, industry, petroleum, finance, transportation, and administration together with the Arab Industrialisation Organisation.
The strategy focuses on encouraging the manufacture of electric vehicles in Egypt through a mixture of research and development, incentives, and tax exemptions. The target is to produce vehicles meeting the highest international standards such that Egypt can become a regional centre for producing and exporting electric vehicles and thus creating job opportunities.
It highlights the importance of developing the production of electric vehicles, which have multiple advantages over petrol or diesel vehicles including lower running and maintenance costs and being more environmentally friendly. It promotes local production, rather than simply the assembly of electric vehicles, with the aim of producing cars made in Egypt with higher local inputs.
The strategy includes a bundle of incentives for the industry, especially to encourage bus manufacturing. Supporting feeder industries is an integral part of the strategy, which aims to support both the production of electric vehicles as well as of traditional cars. This will not require new investments but could be catered for by existing feeder industries, thus triggering more demand.
Tarek Ahmed Bakr, head of the supply chain sector at the Ministry of Military Production, told Al-Ahram Weekly that the main goals of the strategy are to deepen domestic manufacturing with a focus on electric vehicles and to develop automotive feeder industries. Other aims include attracting local and foreign investments and keeping pace with global advances in the automotive industry.
The strategy also aims at preserving the environment and encouraging cooperation between manufacturing companies and research centres to develop the industry, he said. This would help to create jobs, upgrade skills, and create training programmes for vehicle manufacturing, making Egypt a regional centre for manufacturing and exporting vehicles.
Bakr added that the proposed policies included a recommendation to cancel the tax exemptions on imported electric cars and to subject them to an industry development fee in Egypt. In order to ensure that supporting local manufacturing does not contradict Egypt’s free-trade agreements, it has been recommended that a higher rate of value-added tax be collected on imported vehicles, he said.
The strategy also recommends exempting electric passenger vehicles from the private vehicles tax that is part of licensing fees. It recommends that taxi services operating electric vehicles also enjoy the tax refunds that are deducted from the cost of electric vehicles and charging equipment.
The establishment of an industrial stimulus fund is another recommendation of the strategy, aiming to boost the resources available to the industry and provide further incentives. It recommends extending incentives to the end consumer, possibly financed by the fund, and providing offers from banks to facilitate financing.
Bakr said that developing the electric vehicle industry in Egypt was not dependent solely on financing, but also required work on infrastructure by providing charging stations and setting up some 1,000 such stations around Egypt over five years.
Among the most important points under study is the pricing of the electricity used in charging electric vehicles, as it must be financially viable to encourage people to change from vehicles running on petrol or diesel to electric ones.
Bakr said the Ministry of Military Production was preparing to produce electric buses in military factory 200 in cooperation with the Chinese Foton Company. The move is aimed at upgrading buses that have been in operation for more than 20 years. The plan also includes a partial annual replacement of five per cent of the vehicles owned by the public sector, public-enterprise sector, or public economic entities.
Research and development are highlights of the strategy, which promotes cooperation between car production and equipment companies and the research centres of the Ministry of Scientific Research to come up with a local product to international auto-industry specifications that can be successfully exported.
*A version of this article appears in print in the 25 June, 2020 edition of Al-Ahram Weekly