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Egypt Autos Report Q4 2010
Business Monitor International, Oct 2010, Pages: 56
Egypt Autos Report provides industry professionals and strategists, corporate analysts, auto associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Egypt's automotive industry.
Egypt’s automotive sector is back on track as renewed economic growth pulls the industry out of its 2009 slump. The global recession was not as large a setback for dealers and manufacturers as it was elsewhere thanks to healthy economic growth, strong public sector procurement programmes and the presence of international manufacturers. The longer-term question will be if Egypt can make the changes required to become a major automotive market and manufacturing centre.
Egypt’s leading automotive supplier GB Auto, which has increasing regional reach, has posted strong results for H110 and looks set to consolidate its share of a passenger car market forecast by BMI to grow by 12% in 2010, we reported in September. The company's revenues were up 78.9% year-on-year (y-o-y), to EGP3.1bn, as it also took advantage of growth in Iraq, where it has been present for just six months. Egypt's passenger car market grew 38.6% in the first half of the year. Hyundai Motor, represented by GB Auto, saw it sales rise 65.3% y-o-y. A focus on exporting to the wider Middle East and Africa region is also expected to contribute to a doubling of profits for the full year. GB Auto has announced it is looking into opportunities with international counterparts, with potential projects including a new entrylevel car (potentially a strong suit on the Egyptian market, with many middle class families and individuals looking to make their first vehicle purchase). It is also looking to compete its product range in its ‘commercial vehicle line of the business’.
Regulatory changes are afoot. New trade regulations will open the market to the EU, with the likely result of increasing competition for incumbents in Egypt. The country has also established new standards for imported vehicles and components, with the first phase of the standardisation procedure implemented in August 2010. The country had previously not had its own specifications for cars and components, allowing import of almost any items and units, regardless of quality.
Hani Barakat, chairman of Egyptian General Organisation for Standardisation and Quality (EOS), says the new regulations will help boost investment in the Egyptian automotive sector and boost its position as an exporter by improving integration with the international automotive market. With Egypt on the brink of joining the UN Economic Commission for Europe (UNECE), which allows trade in vehicles and components without inspection, the authorities are keen to ensure that exports meet minimum standards and that the country’s growing reputation as an automotive manufacturing centre is not compromised. Consistency and quality have been problems in Egyptian manufacturing, an issue that the government and industry leaders are keen to address.
Barakat has said that the rules will not push up car prices, adding that initial results suggested that costs had not been affected. According to Al Ahram, the majority of car dealers have welcomed the new system. Certainly, international manufacturers and dealers are likely to already be meeting the standards. Smaller, more localised firms, however, may find more difficulty, given the costs involved. Importers that have benefitted from lack of regulation are likely to be affected, though arguably to the benefit of the wider market.
The standardisation process is part of a series of government moves to regulate car imports and encourage exports. On August 14, Minister of Finance Youssef Boutros Ghali passed a decree that permits the refund of fees paid on car and bus exports. The reform has the aim of lowering the financial burden on exporters and stimulating export by local industries.
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