Minister of Trade and Industry Tarek Kabil issued a decision to regulate the system of determining the ratio of local components in the car industry and its feeding industries. The decision stipulated that local components in car manufacturing must not be less than 46%. The contributions of the assembling line in the local manufacturing of a car must reach 28%. This ratio is reduced by 1% annually starting from the year following the date the decision will be in force.
Kabil said that this decision aims to create real depth in this “vital industry,” according to fair and transparent standards, as the ratio followed before issuing this decision was 45% and did not reflect the actual reality nor did it help achieve the ministry’s objective to establish a real car industry based on manufacturing rather than assembling. He pointed out that in the making of this decision, the situation of the existing companies was taken into consideration, as the implementation of the decision would require a specific period, giving existing factories time to adjust their operations.
He noted that this decision is the first step in the national strategy of car manufacturing and feeding industries, which are prepared in coordination and cooperation with several concerned bodies, including the industry committee of parliament and the private sector, represented by leading local and international companies in the field. Kabil also pointed out that this strategy includes offering incentives and guarantees that attract investments to these industries and provide sufficient protection for them—something that would increase the size of the Egyptian automotive market, allowing the existence of suitable cars for citizens of all segments.
Kabil pointed out that the decision included forming a local car manufacturing committee that handles the process of preparing integrated databases for the car manufacturing industry and its feeding industries. The databases would contain all the stages of local car manufacturing operations and automated models to calculate the ratio of the added value of components to be developed. The committee would review lists of car components (fully dismantled) provided by the manufacturing company and ensure the lists match the lists of the parent company, as well as approve the contribution ratio of each car component (fully dismantled), in addition to review the ratios of local manufacturing for each car model.
The local industrial manufacturing committee is headed by the assistant minister for industrial affairs. Its members include the chairperson of the Industrial Development Authority, the head of the central administration for local industrialisation of the Industrial Development Authority, the chairperson of the Chamber of Engineering Industries or his representative, and the chairperson of the Engineering Export Council of Egypt or his representative. The committee may also utilise people it deems necessary. The committee’s decisions are ratified by the minister of trade and industry.
There was disagreement among car manufacturers about the ministerial decision regarding raising the minimum proportion of the local component in the assembly of vehicles locally to 46% instead of 45%, while raising the production line from 15% to 28% with an annual decrease of 1%. The local components have also been cut from 30% to 18%.
Samir Allam, deputy head of the transport division, told Daily News Egypt that the ministerial decision on raising the percentage of the local component and gradual reduction of the proportion of the assembly plan needed to be studied further and given more time to reconcile the situation.
Allam asked the ministry to clarify the distribution of the 46% on components, by setting the proportion of each component and step in the vehicle assembly process, adding that the decision did not clarify whether the old percentages will be adopted or not.
Hussain Soliman, chairperson of the Egyptian Automobile Manufacturers Association, said that the new decision is 100% correct, adding that all proportions are suitable with the Egyptian market, as well as they timetable for the factories to adjust.
Soliman added that the association would send its suggestions on the new resolution and its implementation mechanisms to the ministry, after studying the decision well.