Relocation commotion
Khaled El-Ghamry, Tuesday 29 Jun 2021
A Ministry of Local Development decision to relocate car showrooms to the Ain Sokhna Road is stirring controversy in the autos market, reports Khaled El-Ghamry

The Ministry of Local Development decided in May to close auto showrooms in residential areas across the country. They are now expected to relocate before September to auto city, a complex that can house 400 showrooms on the Ain Sokhna Road.

The ministry’s decision was received with mixed reactions in the auto market. Khaled Youssef, managing director at Peugeot Egypt, said the decision would have a negative impact on the car trade in the country. The decision is controversial because it was issued suddenly and without consulting people in the industry, he added.

Many showrooms in residential areas also have licensed maintenance centres, Youssef noted, wondering how the showrooms can be closed and relocated when they are licensed to operate by law.

Alaa Al-Sabaa, a member of the Automobiles Division at the Egyptian Federation of Chambers of Commerce, said the ministry’s decision was the result of some showrooms violating the law by parking cars illegally on pavements and the streets and obstructing traffic.

They may also have exceeded the number of cars allowed to be exhibited in a showroom, determined according to its size.

The decision to relocate should be applied to violators only, Al-Sabaa said. There are approximately 20,000 auto showrooms in the country, and their closure and relocation would result in chaos for workers in the business and for car sales, he added.

Showrooms that follow the existing regulations do not cause traffic problems because they have a maximum of 10 clients a day owing to the high prices of new cars, Al-Sabaa said, adding that if they were to be replaced by restaurants or stores the results could be worse for the surrounding traffic.

Mohamed Ghoneim, deputy chairman for marketing at Great Automotive, a car dealership, hailed the ministry’s decision, however. In addition to the new car city complex, there were also now a number of other new service areas that offer larger showrooms for customers, he said.

The majority of showrooms are rented, he added. Some do not have a licence to trade in vehicles, with many being licensed to trade in durable commodities instead. This was the result of a 1994 law that halted new licences for car showrooms in Cairo, rendering the status of new ones illegal, Ghoneim said.

The ministry’s decision would mostly result in auto agencies redistributing their accredited distributors, he said. However, smaller showrooms selling used cars and a few new vehicles could be harmed.

Former Heliopolis resident Bassem Diab moved to one of the cities on the outskirts of the capital after two car showrooms opened on the small street where he lived, resulting in excess noise and traffic.

He said that moving all the showrooms to one area would raise competition between traders and provide better prices and services for clients.

Ahmed Al-Mazahi, an automobile expert, is not in favour of the ministry’s decision. Investment in the vehicles sector, made up of investment in plants, showrooms, and maintenance centres, is estimated at LE48 billion, and it is where some 40 European, Asian, and US brands put their money, he said.

Dealerships attract investment by selling cars in private showrooms, which comprise 50 per cent of the network in Egypt. The remaining showrooms are smaller ones used by accredited distributors.

The decision could negatively affect car sales. Existing showrooms are distributed across the country to bring them closer to customers. Putting them all in one place would decrease revenues and affect investments in the sector, Al-Mazahi said.

In 2020, more than 231,000 private cars, buses, and trucks were traded in Egypt, including around 168,000 private cars.

*A version of this article appears in print in the 1 July, 2021 edition ofAl-Ahram Weekly