A few days ago, President Abdel Fattah Al-Sisi directed the government to put a plan for localising the automotive industry, and since then the sector has started to present proposals and demands to the government to take them into consideration while drafting the localisation plan. The most prominent demands were concerning obstacles emerged due to the customs imposed on locally assembled auto parts while zero customs on many imported cars, which caused a price gap between the two sides. Other requests were about supporting the feeding industries and facilitating car export.
In a different note, many car agents still deny any negative impact on local car factories due to the Coronavirus (COVID-19) outbreak, and that media reports circulated recently about Coronavirus-caused slowdown in the local auto sector were just baseless rumours.
Amr Soliman, chairperson of AlAmal Auto, BYD and Lada’s agent in Egypt, praised the state’s efforts towards localising the auto industry and deepening the feeding industries, which stimulates sales of locally assembled cars.
He said the local industry, whether feeder or assembly plants, is in great need of support to increase their production capacities and job opportunities, adding that Egypt has a broad manufacturing base but it does not get the same support like imported cars.
It is illogical to place customs on auto production components because this leads to an increase in costs and affects car exports’ competitiveness.
He noted that no investor will inject more money in the market unless there is an appropriate return on his investments. The Egyptian market can absorb large production volumes, given the high population of over 100 million people, while the total sales are only 160,000 units annually, which is too low.
He stressed the need to support auto factories, so that they can reduce the production cost, which opens the door for export to neighbouring markets. The local components currently used in the production of cars are glass, exhaust, battery, electric braids, seats, carpet floors, and some parts in the suspension and gasoline tank, which add up to 45% of the total car production. He pointed to the possibility of deepening the feeding industries by increasing the quantities produced by supporting the industry, denying the existence of any objections by the parent company in determining the proportion of the local component, but that the local components depend on their cost in the car, when the cost of the local product decreases, its percentage may increase in car assembly operations.
On a different note, Soliman ruled out the existence of any negative effects of the Coronavirus outbreak on the Egyptian auto sector, even though the operating capacity in China decreased heavily. However, it is possible that these effects will appear after two months if the situation gets worse, stressing that this position is temporary and will end within a month. He denied the existence of any problem related to the assembling the BYD brand. The annual production of the Chinese car is 8,000 units and its market share is 3-4% locally.
In a related context, Ramy Mohareb, spokesperson for Nissan Egypt, believes that the strategy of the auto industry will boost sales of locally assembled cars, demanding that locally assembled cars obtain more advantages than their imported counterparts due to the employment opportunities provided by the local assembly factories, which will increase the competitiveness of the local product.
He said that the support and deepening of the auto-feeding industries contribute greatly to the advancement of the auto industry, which is the locomotive of the industrial sector in Egypt, noting that the increase in the local component in assembling cars is reflected positively on the price level of the car, as the lower production cost of cars, the more competitive with imported counterparts.
He noted that it is a necessity to introduce new feeding industries into the assembly operations.
He ruled out any interference from the parent company in Japan regarding determining the percentage of the local component, stressing that Nissan Egypt is subject to government decisions regarding determining the proportion of the local component, and Nissan is one of the companies that heavily rely on local components, as the percentage of the contribution of the local component in the production of Nissan cars is close to 50%.
He said that the company aims to increase domestic production for export to neighbouring markets, stressing the need to have a competitive price for the local product by deepening the feeding industries and increasing their productivity, which allows the supply of local components at lower prices, and therefore the cost will be competitive for any other car in the neighbouring markets, especially in light of strong competition markets like South Africa and Morocco.
On the other hand, Khaled Saad, Secretary-General of the Egyptian Automobile Manufacturers Association (EAMA) and General Manager of Brilliance, expressed his happiness at the efforts of the Egyptian government on upgrading the automotive and feeder industries, as supporting and deepening the local industry will contribute to raising the sales of locally assembled cars, because the advantages that imported cars obtain make the competition very difficult.
He said that Egypt manufactures many parts of cars, such as Air Conditioners, gaskets, glass, battery, electric cables, and seats, and there are many industries that can be introduced in the feed industries to raise the percentage of the local component’s contribution by deepening the feeding industries, as the seats are not made entirely, but rather parts are manufactured.
Saad stressed that Egypt has full capacity to manufacture and produce all car parts except for the engine and the gearbox, as the local market is currently not eligible to manufacture these parts due to the huge investments and high technology they need.
He said that the parent company sets specific conditions with regard to local manufacturing operations such as identifying the local parts involved in the production of cars, and ensuring their quality and compliance with the standard specifications.
He noted that the implications of the Coronavirus affect all imported products, whether from China or other countries, and that negative effects hit both imported and locally assembled cars, given the latter’s reliance on the feed industries that are used in Its production of raw materials imported from the Chinese market, which of course affect the availability of the local product, ruling out the appearance of any problems related to the Chinese brand Brilliance until now due to the stock availability.
Commenting on the direction of feeding factories turning to other markets alternative to the Chinese market for the import of raw materials, Saad said that this will raise the production cost and consequently increase the prices of cars, because the Chinese market is the largest auto market in the world and produces a large amount of industries, which contributes to reducing the import cost compared to other markets, whose production volume of cars does not rise to the level of production in China.
He added that the localisation of the car industry and increasing local production in order to export are among the most important items that the strategy must include, because export provides the hard currency for the country and contributes to increasing national income.