Willa Thayer explores the bumps and straightaways along the road to moving high-end automobiles in Egypt Click to view caption A potent mix of image-consciousness and cash to burn among Egypt's wealthy has meant that high-end automobiles have become a frequent sight on the streets of the country's major cities. And, according to the local dealers of these cars, neither the liquidity crunch plaguing the country since late-1998 which preceded a slowdown in private sector growth, nor recent political and economic shocks that have made consumers worldwide wary of parting with cash, have made much of a dent in sales figures. Jaguar, purveyor of the most expensive luxury cars in the country and one of the newer entries into the Egyptian market for high-end vehicles, is particularly firm in its assertion that it is experiencing no difficulty weathering the recessionary storm. "Our customers have not been affected by the recession, unlike those of other brands," claims Mostafa Salah, senior sales executive for the Jaguar Egypt dealership. While the story of luxury cars in Egypt goes back to the early 20th century, when French, British and American cars were favoured, the tale of the current market is best told within the context of the heady days of the last few years of the millennium, when an increasing number of international luxury brands peddling jewellery, furniture and clothing decided that Egypt offered a lucrative market for their goods. During that period, automotive dealerships were set up in Egypt for Jaguar, in 1996, and Alfa Romeo in 1998 -- just two of the new entries into the market. Mercedes-Benz, which has been in Egypt since the 1950s, considerably expanded its operations in 1997 when it established an auto-assembly plant on the outskirts of the capital. When the plans for those three businesses were being made, Egypt's economic future appeared relatively promising. Debt forgiveness, owing to the country's participation in the allied coalition in the Gulf War, as well as aid inflows, saw increased public investment, especially in infrastructure, during the second half of the 1990s. The World Bank, in a report issued last summer, called Egypt's growth performance during the second half of the 1990s "robust", noting that its growth was higher than the average for countries in the Middle East and North Africa. That growth, however, was in large part a result of domestic demand for Egyptian goods and services, the bank writes; exports, the Suez Canal, oil and remittances all accounted for a declining share of the country's GDP in those years. That growth wasn't shared in equally by all sectors is perhaps not surprising. The independent Almishkat Centre for Research, which has done extensive work on income and employment trends in Egypt and the region, has written that the "feminisation and ruralisation" of unemployment were hallmarks of the early 1990s. But what has been happening at the other end of the scale? The very visibility in the late 1990s of high-end consumption suggests that the number of those with purchasing clout was none too small. Witness a boom in holiday home construction, the proliferation of new sub-divisions catering to the wealthy and of high-end food and beverage outlets. Western-style supermarket chains appeared throughout the higher income areas of the capital. Imported cheese -- a close second to luxury cars in terms of provoking awe among have-nots over the buying power of the wealthy -- was no longer the exclusive purview of specialty stores but became available at the new markets as well as at the corner stores in the wealthier neighbourhoods for as much as LE175 a kilogramme. But such a snapshot cannot substitute for hard figures. Yahia Abdelkodouss, marketing/ communication manager for Mercedes-Benz Egypt passenger cars, says, "About two million people in Egypt could consider having a Mercedes in their garage," before qualifying his estimate to say that the figure is perhaps "a bit inflated". That number, too, includes used Mercedes, for which there is a thriving market. The availability of Mercedes in the 1950s alone should make it clear that the late 1990s were certainly not the first years since the 1952 Revolution when the country's wealthy proudly displayed their purchasing power. Certainly, private capital had already been emboldened by the Infitah, or economic opening, launched in the mid seventies by then-President Anwar El-Sadat, which facilitated the inflow of capital by allowing joint ventures. What sets the 1990s apart from previous decades, and perhaps partially accounts for the extent to which those at the upper end of the earnings' spectrum gave the appearance of having abandoned any vestiges of shyness about showing their wealth was the prevalence of the term "private capital" in the state's lexicon, and its utterance in laudatory tones. Although the state had praised private capital during the first decades following the revolution -- in the doublespeak of the early 1960s it was called "patriotic non-exploitative capital" -- the launching of the privatisation programme in 1991 saw the state proclaim the virtues of capital that was explicitly "private". On a cultural level, at least, the state had liberated private capital -- so that money no longer needed to be anyone's dirty little secret. While the liberalisation of the economy appears to be having dire consequences for the have-nots, crime remains relatively low. Theft of car stereos and auto-theft are not major worries for car owners in Egypt, while car-jacking is virtually unheard of, meaning that a major drawback of luxury car ownership in other locales barely applies hear. The late 1990s also witnessed an eagerness on the part of those at the very top of the earnings' pyramid to differentiate themselves from the merely wealthy. This trend was evident in the establishment of a country club on the capital's outskirts and a dining club in the centre of Cairo. These entities offered facilities and services far beyond those at the country's most exclusive sporting clubs -- at prices much higher than those of the other institutions, too. As publicity for the new clubs boasted, vetting procedures safeguarded their elite character, ensuring that money alone was insufficient criterion for membership. While frequenting an exclusive club can be considered an assertion of status that is simultaneously public and private, cars offer greater scope for a public proclamation of their owner's place in the social hierarchy. For those with the greatest purchasing power, Jaguar has leapt to the fore, selling vehicles under its own name as well as Daimler sedans, with its most expensive models costing LE800,000 to LE one million. (All automobile prices mentioned in this article are inclusive of import duties.) Mercedes, too, continues to be a player at the top end of auto-expenditures, offering its imported "S" class passenger automobiles for marginally less than a high-end Jag, starting at approximately LE700,000. But expansion in the range of luxury goods for sale in Egypt has not only been upwards: it also included the lower end of the spectrum, allowing those lurking at the economic elite's fringes to participate in the parade that is particularly in evidence on weekend evenings outside high-end eateries, watering holes and five-star hotels. Alfa Romeo is just one car filling this gap, with models for sale at LE145,000-200,000, making it a relative bargain, although its "cuor sportivo", sporty image, is quite distinct from the more sedate impression made by Jaguar and Mercedes. While Alfa does make higher priced models -- the 166, for instance -- Alfa Romeo Egypt, says Hany Refaie, marketing specialist for the dealership, has decided not to market such vehicles here for the time being, although its price of LE300,000 would maintain the brand's position at the lower end of the market, cost-wise. In keeping with what has become an international trend in luxury goods, Jaguar, too, is making forays into the lower and middle end of the luxury market with its X-type that starts at LE340,000, and its S-type, more of a mid-range luxury vehicle in terms of prices in Egypt, starting at LE530,000. Mercedes, too, caters to people for whom LE700,000 is just too much, offering locally-assembled "C" and "E" class cars. C-class vehicles run from LE214,000-257,000 while E series' automobiles go for between LE360,000- 460,000. When asked about sales figures for the difficult economic period since late 1998, only Mercedes was forthcoming with precise numbers. For 1999, it sold 1,240 passenger cars; in 2000 it moved 1,468, while 2001 saw its figures dip to 1,306. Mercedes's Abdelkodouss explains that much of 2001 was very slow, in fact, with sales only really picking up at the end of the year ahead of the most recent devaluation of the pound in mid- December. At that time, buyers rushed to submit orders fearful that the increasing price of the dollar would raise the cost of the vehicles. Jaguar's Salah conceded that 2001 "was not a good year" when pressed to discuss fluctuations in sales, adding that 2002 was going "much better" with the dealership having sold 20-25 vehicles by June. By comparison, the company during its first year of business moved 40 automobiles. Salah puts total sales since the dealership was established at approximately 300. For Alfa Romeo, sales have been fairly steady since it set up shop in Egypt, says Refaie. They did drop a bit, however, during March and April of this year when the situation in the occupied Palestinian territories had become particularly dire and the domestic solidarity movement was in full swing. Even so, the dent in sales was not as dramatic for Alfa Romeo as it was for the other brand that Refaie's organisation sells, Fiat, which saw the sales of its Punto economy vehicle almost come to a complete halt as local concern about Israel's incursions into the West Bank peaked. Rather than providing specific sales figures, Refaie offered an approximation of the number of Alfa Romeos in Egypt, saying that it was "no more than 1,000", a figure that he said encompassed 10 years of sales. (Prior to the establishment of the dealership in 1998, Alfa Romeo was regularly imported beginning in the early 1990s by another company.) Both Jaguar's Salah and Alfa Romeo's Refaie volunteered that they were pleased that the streets were not teeming with their brands saying that their relative rarity enhances the prestige factor. Mercedes, with its long history in Egypt and seeming ubiquity on the country's streets, elicits immediate recognition across the class spectrum, to the extent that during the 1980s and 1990s various models came to be widely known by Arabic nicknames. One particularly wide model was named after an actor with a rather broad posterior; another, sporting an imposing front grille was dubbed "timsahah", crocodile, while a sleek sporty version became known as the "shabah", ghost. A more costly model was labelled "boudra", powder, the reasoning being that only someone engaged in the cocaine trade could afford such a vehicle. Such notoriety has allegedly pushed some customers to seek brands that are less widespread on the country's streets. One society matron is said to have explained her family's decision to purchase a Jag on the basis that Mercedes had become too prevalent, and by the time the company began assembling cars domestically, the brand for her had become "baladi", downright common, that is. Mercedes's Abdelkodouss is unfazed by such tales, and instead highlights his company's vast network of dealerships and the widespread availability of spare parts in Egypt. Jaguar, in contrast has only one showroom operating, having recently temporarily closed its second location. Unlike the other brands Al-Ahram Weekly contacted, Mercedes does not have a "typical" customer in Egypt, its cars being owned by a broad spectrum in terms of purchasing power, image and bases of wealth. With its local assembly plant, Mercedes, says Abdelkodouss, has a particular advantage in being able to sell its vehicles at a very competitive price locally. (Since the factory started production, the brand has seen its domestic sales increase, says Abdelkodouss, however, Mercedes was unable to provide sales figures prior to the establishment of the factory.) Mercedes situation is distinct from that faced by the brand in other markets, Abdelkodouss says. Abroad, the brand faces competition from other comparably priced vehicles with similar images and specifications. In Egypt those same brands are unable to compete price-wise with the locally-assembled Mercedes, owing to Egypt's high tariffs. Whether the exclusiveness of brands like Alfa Romeo and Jaguar are actually a major concern for their customers or merely mentioned by auto dealerships as a sort of compensation for lower sales is an open question. However, in Egypt both of these brands are directed at narrower market niches. "Girls love Alfa Romeos; they love to be with someone driving an Alfa", Refaie says. The brand's customers in Egypt tend to be primarily male, and for the most part between the ages of 30 and 45. Many customers work in the media, and in keeping with the car's action-man image, another identifiable group comprises airline pilots. Jaguar's Salah wants to talk about women, too. The women Salah is concerned with, however, are in the driver's seat, being the target market for the brand's mid-range S-type cars, internationally and in Egypt as well. Salah says that Jaguar Egypt has been successful in reaching this market, in part through use of such women-targeted advertisements in the regular automobile supplement of a major daily newspaper. In terms of the bases of wealth of Jaguar Egypt's customers, Salah says that people who drive Jags are "very rich; they are into everything, not just in one specific field". Another factor that sets the Jaguar customer apart from those of other brands is that they must be able to obtain hefty sums of foreign currency -- no mean feat these days -- because the dealership requires that a car's list price be paid in dollars, accepting Egyptian pounds only for duties. Whether customers pay for their cars in pounds or dollars, the reckoning for the fulfilment of such tastes is ultimately international: at some point hard currency must change hands, whether between the customer and dealership or dealership and mother company. That the rush to cater to wealthy Egyptians' cosmopolitan tastes occurred in the midst of a relative economic boom that was so domestic in character lends a measure of irony to the phenomenon of the sudden and widespread availability of the best the world has to offer from clothing to automobiles. Although the state long ago discarded the term "patriotic" as applied to Egyptian private capital, both the state and private capital are keenly aware that private capital bears a national responsibility to realise at least some of its profits internationally -- that is to export goods and services and obtain hard currency at a higher rate than the domestic demand for it. But that, evidently, is none too simple. Mercedes, offers a case in point. While the locally- assembled vehicle is doing very well in Egypt, Abdelkodouss points out that it would not be competitive in other Middle Eastern markets, primarily because of lower tariff barriers. In those markets, the Egyptian Mercedes would lag behind its German-made sister, too, because the latter hails from a factory with a daily capacity that is equivalent to the current annual output of the Egyptian factory. As the country collectively holds its breath, concerned by the possibility of further devaluations of the pound, the question arises as to how many more changes to the exchange rate will spark a rush in orders for luxury cars. If rumours of an imminent devaluation cause prospective customers to hang on to their money, it can only be a sign that things have become dire, indeed.
