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Egyptian market growing despite pandemic: Car sales up

Going against all the odds, car sales in the Egyptian market increased during 2020

Ahmed Kotb , Thursday 18 Feb 2021
Car sales up
Car sales up
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Car sales in Egypt continued to rise year-on-year during 2020, recording a 32-per-cent rise despite the coronavirus pandemic, a report issued by the Automotive Information Council (AMIC) has said.

More than 168,000 passenger cars were sold in the Egyptian market last year, compared to approximately 127,000 in 2019. Bus and truck sales also increased by 30 and six per cent, respectively, with about 26,500 buses sold and about 37,000 trucks purchased in 2020.

According to the AMIC report, 2020 was still a difficult year for the auto market after sales initially declined with the outbreak of the coronavirus and the subsequent precautionary measures taken, including partial closures. These caused a 26 per cent decline in sales during April 2020.

The report pointed out that the spread of the coronavirus had led many companies to suspend their production across the world as a result of precautionary measures taken by governments. Some factories were reported to have been forced to close their doors in the second quarter of 2020 or to work at half capacity to prevent the spread of the coronavirus.

In contrast to the domestic market, global car sales fell by about 16 per cent during 2020, with 76.5 million vehicles sold, compared to 91 million in 2019, down from the highest level of 94.3 million vehicles sold in 2017.

Local manufacturing and assembly lines were also disrupted in the same period due to the lack of imported materials at the height of the pandemic, but Egypt’s car market stabilised during the second half of 2020 and recovered from the repercussions of the pandemic.

This was thanks to initiatives taken by many banks to ease procedures for car loans, various offers made by car dealers, and the government’s older-vehicle replacement and conversion initiative.

The Central Bank of Egypt (CBE) has recently decided to raise the maximum installments allowed from a customer’s total fixed income to 50 per cent instead of 40 per cent, making it easier to acquire loans and thus the possibility of more car purchases.

“Our company is in talks with the banks to increase the offers made by auto companies to encourage sales by installments,” said Hatem Yousri, a senior sales representative at Auto Maged, a car dealer.

Installments account for the majority of car sales in the Egyptian market, he added. “We expect more sales in the coming months as a result of such offers.”

Yousri said that offers and price cuts on many models of passenger cars had helped increase sales in the second half of 2020, adding that the price cuts had ranged from five to 15 per cent on certain models.

Such offers were satisfying to many customers, who had lined up in front of car dealers to reserve their favourite models. However, this had driven up prices at some car dealers, who had charged extra for making cars immediately available instead of waiting months in some cases.

“The price of my car dropped from LE390,000 to LE340,000, which was when I decided to buy it,” said Sara Hisham, a 30-year-old teacher, adding that she would not have bought the car had it not been for the price cut.

But the prices were still expensive for Mustafa Fawzi, a 35-year-old banker. “I believe cars are still overpriced despite the availability of good bank offers on installments,” he added.

The government’s older-vehicle replacement and conversion initiative aims to convert some 150,000 vehicles to natural gas and to scrap 250,000 older cars within three years.

Effat Abdel-Ati, head of the Automotive Division at the Cairo Chamber of Commerce, said that the initiative, which highlights the state’s desire to encourage and promote the use of clean energy and gas and electric cars, has helped to revive the car market.

“In addition to being part of a global trend to support clean energy and fight pollution, the initiative will have various environmental and economic impacts,” he added.

Abdel-Ati explained that the shift to clean-energy required years of work, especially since Egypt had a large number of older cars that it would take a long time to replace. The government has encouraged many car-owners to either replace their old vehicles on their own or to apply for new ones through the replacement initiative.

President Abdel-Fattah Al-Sisi inaugurated Egypt’s first Go Green exhibition last month to showcase technologies and financing programmes available for converting petrol-powered vehicles to run on compressed natural gas (CNG).

Encouraging the use of CNG in vehicles will also help to develop modern infrastructure and build new roads, as well as reduce the cost of subsidised petroleum products in the state budget.

The older-vehicle replacement initiative allows owners to replace an old car with a new one, with a financial incentive of up to LE60,000 as a down payment for the new car running on natural gas. There is a three-per-cent interest rate over a repayment period of up to 10 years.

The government has announced that citizens wanting to participate in the programme can apply at www.gogreenmasr.com.

The initiative fuelled optimistic growth expectations in the car market for 2021. These were also driven by the strong performance of the Egyptian economy, acknowledged as the strongest among emerging markets in 2020, and the development projects undertaken in Egypt, especially new roads and bridges, as well as new cities.

“All this will reinforce the need for a new fleet of cars,” Abdel-Ati said.

Sherif Al-Desouki, managing director of the trade publication Nissan Motor Egypt, said in an interview with the Al-Mal newspaper that his company saw the Egyptian market as one of the most promising, witnessing a growth in sales in conjunction with an increasing population of 100 million people, with 70 per cent of these under the age of 30.

He said that the rate of car purchases in Egypt was low at 60 vehicles per 1,000 people, compared to a number of comparable countries, including Morocco, Tunisia, and South Africa.

He added that he expected better economic growth rates in the coming period, which would positively affect the local auto industry.

 

*A version of this article appears in print in the 18 February, 2021 edition of Al-Ahram Weekly

 

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