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Viewing report
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Egypt Autos Report Q4 2011
Business Monitor International, Oct 2011, Pages: 46
Egypt's autos industry remains in the doldrums as we enter the final quarter of 2011, with demand for new vehicles remaining depressed by a combination of both economic and political strife. According to figures from Egypt's Automotive Marketing and Information Council (AMIC), as cited by the Ahram online website in September 2011, total autos sales have fallen by 33% year-on-year (y-o-y) over the January-August 2011 period to just 111,108 vehicles.
Looking at vehicle sub-segments, passenger car sales are down by 34.4% y-o-y at 83,700 CBUs sold, while bus sales were also down, by 34.7% at 7,865 units sold. Truck sales were down by 25.3% at 19,444 units sold, although this did represent an outperformance of the wider market.
Month-on-month (m-o-m) sales are also locked in a seemingly inexorable decline, with passenger car sales of 12,626 units for August representing an 11.5% decline m-o-m.
Against this backdrop, it is clear that there remains a downside risk to BMI's new autos sales forecast of 177,946 units for 2011, with its production figure of 83,017 also likely to come under pressure for as long as demand remains so becalmed.
Clearly, the political unrest and subsequent regime change of the scale seen in Egypt in the first half of 2011 was bound to have a knock-on effect economically and the autos sector was hit particularly hard. A number of companies temporarily halted production completely and investment has been scaled back across the sector to allow time for the ramifications of the political change to become clear.
Vehicle production was severely affected by the unrest, with all companies experiencing total shutdowns for varying degrees of time. Despite the reopening of plants, there was a period of adjustment before full capacity production was resumed and as a result 2011's production will see big drops. BMI has revised its forecasts accordingly. Total production for the year is expected to amount to 83,017 completely built units (CBUs), an annual fall of 47.48%. The industry is expected to claw back some of this lost ground over the course of 2012 but believe that production will not begin to reach 2010 levels until the end of 2013 at the earliest.
The political turbulence will also have a devastating effect on new vehicle sales. The general uncertainty that was created by widespread social unrest, in addition to rising inflation and a struggling economy, has resulted in a decline in discretionary consumer spending. BMI's revised forecast for total sales is 177,946 units; an annual fall of 42.24%. BMI expects, as the market settles, to see a 56.76% rebound in 2012 and for the new car sales market to maintain good levels of growth to the end of its current forecast period, ending with annual sales of 540,617 in 2015.
A major factor in the decrease in sales was the decision of local banks to severely restrict car loans. In two-thirds of cases, new car purchases in Egypt are financed by loans and the increasing difficulty in obtaining loans has hit autos dealers hard. Some companies are reacting to this development by forming their own financing units to overcome the restriction of credit. Industry leader GB Auto and Chrysler have both recently announced the establishment of credit facilities. BMI believes the Egyptian autos sector is likely to see increasing growth of in-house financing schemes.
The previous government offered significant support for the autos sector and had at the time of its downfall just introduced a ten-year incentive scheme aimed at boosting the local production of autos parts.
In March, the new government announced that because of alternative spending priorities the programme was to be postponed without any indication of when or if it would be reinstated. BMI believes the delay in the implementation of the scheme will hinder the domestic development of the autos sector in Egypt and could damage the regional competitiveness of the industry against the likes of Morocco and Algeria, both of which are looking to develop vehicle production.
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