After 12 months of stagnation, BMW is restarting production in Egypt. Yasmine El-Rashidi reports Amidst eager anticipation, BMW Group's Senior Vice President Lueder Paysen announced that BMW's assembly line in Egypt would once again start rolling -- this time, out of a newly-purchased factory in Sixth of October City. The first vehicles are expected to be on the market by March 2004. The new facility -- a half-finished automobile factory initially intended for SEAT -- was purchased for an undisclosed sum by Bavarian Auto Group, BMW's new authorised importer and assembler. The announcement should mark an end to BMW's difficulties surrounding the controversial "Abul-Futouh affair" -- an alleged case of customs evasions, possession of firearms, and bribery brought against former BMW importer and manufacturing agent Hossam Abul-Futouh. A circulating rumour claims the businessman may have been framed by a rival. BMW suspended Abul-Futouh's agency early this year, after the Financial and Commercial Affairs Court ordered the businessman to stand trial. Abul-Futouh allegedly evaded customs duties on alcohol totaling LE6 million, and is under investigation by the Supreme State Security Court for allegedly offering bribes to a former chairman of Banque du Caire in return for credit facilities worth LE964 million. "It has been an unfortunate year for us," Paysen said of the situation. "We were forced to cancel our importer's license, and since then have been in negotiations. We attempted to purchase the factory where our previous importer manufactured the cars, but that did not work out due to legal difficulties." Paysen asserted that BMW's suspension was not a result of controversy over the price of the vehicle, as some elements in the press had speculated. "It was not a matter of price," he said. "It was due to legal obstacles. We sat with the Abul-Futouh family who wanted to sell all their assets, but legal complications of the case made it an impossibility." BMW's new plant will begin production in January -- with a production capacity of 4,000 units per year. The plant, which Paysen described as having "utmost strategic importance", is expected to feed neighbouring markets as well. "In the past our maximum market absorption was 1,600 vehicles per year," said Helmut Broeker, director of Africa and Caribbean BMW Group. "We hope this time to use the maximum factory capacity. Initially we expect 1,500 vehicles to be sold on the local market, but Egypt is a strategic market for COMESA (the Common Market for Africa and the Middle East) and neighbouring countries, and we hope to use our factory in Egypt to sell to those countries too." The new factory, built on an area of 37,000 square metres, is expected to create at least 200 jobs for Egyptians. "Absolutely, we are keeping the employees of the last plant," said Ulli Urban, CEO of Bavarian Auto Group. "And we will create many more jobs," he laughed, "Only three of us are German!" In the past year, the nation's economy has been on a rocky path -- the pound's value eroding and prices relentlessly rising. In the past 11 months since Prime Minister Atef Ebeid announced the floatation of the pound, the dollar has strengthened 25 per cent against the pound. The automobile market has contracted sharply due to skyrocketing prices -- BMW's latest models are now selling at LE100,000 more than two years ago. Last official figures show that new car ownership fell from 85,000 in 2000 to 55,000 in 2002. Car ownership in Egypt is estimated at around 22 per 1,000 people, compared to 35 per 1,000 in Iran and more than 100 per 1,000 in Saudi Arabia. "Marketing will play a crucial role," Urban told Al-Ahram Weekly. "We will also be releasing new models which we expect will increase demand. Our first step is to gain back our old customers, because of course when you don't manufacture anything, then you lose all your customers. We are expanding our network of BMW dealerships around the country, and even looking at Sharm El- Sheikh, which has been an absent market," he continued. "The country has huge potential and can put itself in a position to be constantly expanding. The potential income from tourism is very great, and the country needs to capitalise on this. We have a marketing plan that takes this into consideration. You will see us everywhere." The nation's economic woes may not rattle the elite class of BMW buyers, who are looking at cars ranging between LE250,000 and LE1,000,000 each. "To a certain extent BMW customers are in a class of their own," Paysen said, "The last few years the exchange rate has gone up, which is not healthy, but I still believe in the Egyptian economy, and it will improve sooner or later. If you look at the Egyptian market on a mid-term basis, and if you look at our target group and potential customer group, then in this market in the medium run we should be able to sell between three and four thousands cars a year."
