Abstract
In part due to Egypt’s relative insulation from the effects of the
global credit crisis, BMI maintains its
forecast for a 5.% fall in
automobile sales in US dollar terms in 2009, with a rebound seen coming no
earlier than the second half of 2010. In volume terms auto sales should reach
638,000 units by 2013. BMI
believes that the market will undergo a short
period of lower sales in the first half of this year and an
overall annual
fall of perhaps up to 20% in some sectors of the autos market. This is mainly
due to the
effects of the global financial crisis, which is continuing to
have a severe impact on Egypt’s domestic
demand and fixed investment
dynamics across the full range of domestic production, as well as on
secondary auto-related markets, and both imports and exports. Changes made
earlier this year in the trade
tariff structure should help mitigate
against the problems facing local operations, but a slightly more
restrictive credit market will continue to hit, particularly the lower end of
the domestic passenger car
market, and in turn increase demand for used
cars and rentals. Furthermore, the inflation rate is expected
to come down
in Q309, but remain relatively high enough to impact the consumer’s
appetite to spend, as
the central bank will likely keep rate cuts on
hold.
Meanwhile, the trade deficit in the Egyptian autos market, which
rose 80% in 2008 to an estimated US$
4.35bn, has fallen off, although BMI
still expects an increase in exports in the next two quarters.
However,
the deficit is seen staying relatively high as the manufacturing sector
remains unable to keep up
with demand.
On the political front, the
government’s erratic, in part pro-active, approach to the domestic
credit sector
is a key factor influencing the fate of the car sector. In
late March 2009, the central bank launched an
EGP15bn (US$2.7bn) lending
program aimed at enhancing credit growth and boosting the mortgage
market,
durable goods – as well as transport items. Other incentives include
reducing fees on car exports
by 2%, exempting car manufacturers from
paying taxes on equipment and capital goods and customs on
imported
components.
A sign of positive possible growth shoots, Ghabbour Auto (GB
Auto), Egypt' s biggest auto maker, said
in the second quarter that it
plans to spend about EGP1bn (US$178mn) on purchases. In particular, as
reported by Zawya, GB Auto is looking to snap up auto distributors or auto
parts producers in the Middle
East & North Africa (MENA) region. GB Auto,
which has the exclusive licence from South Korea' s
Hyundai Motor to sell
Hyundai cars in Egypt, said it might make purchases to expand its product
line.
Meanwhile, Land Rover' s exclusive importer in Egypt, MTI Automotive,
which noted a 49% rise in
sales in December 2008 year-on-year, is also
seen benefiting in 2009 as the higher end of the car market
remains
relatively robust, despite some temporary plant closures. On the downside,
Hyundai Franchise
Director Mustafa Abdel-Halim said in April that its
agents are selling around 2,000 cars a month
compared with a peak of 7,000
in the summer high season. Prices are expected to fall and many
dealerships are seen taking a wait-and-see attitude
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