The depreciation of the Egyptian pound against other currencies, especially the US dollar, has hit the car market hard since this mainly depends on imports and it has translated into price increases for consumers. “This comes at a time when the market is already suffering from lower-than-usual demand as the unrest makes many potential buyers delay their plans to purchase new cars,” said Effat Abdel-Atti, head of the cars division at the Cairo Chamber of Commerce. Abdel-Atti said that the depreciation of the Egyptian pound to a record low of LE6.67 (on Tuesday) to the dollar had forced many companies to raise the prices of foreign models. Ahmed Al-Deeb, branches general manager of Al-Masriya, Egypt's largest distributor of cars, confirmed that prices had gone up by seven-10 per cent depending on the model. “By the end of 2012, sales figures were satisfying and better than in 2011. We expected the market to continue to grow by the beginning of this year, but the depreciation of the pound forced price hikes, making many customers hold back,” he said. He added that the price of some cars was increasing on a week-by-week basis, reflecting the increase in the value of the dollar and other currencies. Khaled Youssef, head of the passenger cars sector at the Egyptian International Motor Company, said that car companies faced difficulties in deciding prices because of the fluctuation of the value of the dollar and other currencies. “I expect sales to drop by about 20 per cent in comparison to last year,” he said during a press conference held at Automech-Formula, the largest automotive exhibition in the Middle East and North Africa organised in Cairo from 17 to 24 January. According to the Auto Makers Information Council, the automotive market performed well in the second half of 2012, achieving an increase of 13 per cent with 179,000 vehicles sold against 159,000 in 2011. This came after sales declined by almost 30 per cent in 2011 after the 25 January Revolution. All activities related to car production, including feeding industries and maintenance centres, that depend on imports have felt the pinch of the local currency's depreciation and the political and economic instability. “Many car owners now even delay changing their engine oil for economic reasons, unaware that this could be harmful in the long run,” said Amin Elewa, technical sales supervisor at Valvoline Egypt, a provider of automotive lubricants, chemicals and other car-care products. However, he said, a product like engine oil was essential at the end of the day and many customers were aware of that. “Our sales have not been heavily affected,” he said. Most maintenance centres have managed to keep prices as they are over the past few weeks, albeit with lower profit margins, because they want to keep their customers coming while hoping that the pound will gain in value. “If the pound keeps losing value, we might be forced to push up prices,” Elewa said. Abdel-Atti noted that with the euro jumping to LE9.07 against the pound, compared to LE8.1 last month, customers will not benefit from the annual 10 per cent reduction on customs duties that has taken place every January since 2010 on imported European cars, according to an Egyptian-European agreement that aims to decrease duties until they reach zero by 2019. Recent research published by TNS Egypt showed that Egyptians were considering buying budget cars in response to the increased value of the dollar, as well as anticipated fuel-price increases. The research found that 55 per cent of those planning to buy a passenger car believed the value of the dollar against the local currency would have an impact on their purchase budgets, but would not stop them from buying. Twenty-eight per cent believed that the effect would be limited, while 17 per cent were waiting to see what happened before they decided to buy. “The increased US dollar rate and the anticipated increase in fuel prices have confused the market, although those who are planning to buy cars will proceed but probably with more budget-driven choices,” said Tamer Al-Naggar, TNS CEO for Egypt and North Africa. The Automech-Formula exhibition was an opportunity to give the industry a boost, with almost all car manufacturers, agents, and feeding industries present and showcasing their latest models and products. However, last week's street riots prevented the industry from taking full advantage of the opportunity. “People are afraid of the uncertainty of the market amid pricing instability, and of riots that might lead to the destruction or robbery of their newly purchased vehicles,” Abdel-Atti said. However, he expected to see a return of stability soon, which would clearly benefit the automotive market.
