The Egyptian car market is steadily shaking off the repercussions of the global economic crisis, reports Ahmed Morsy This time last year the Egyptian car market was, basically, in neutral. The global economic crisis had just put the brakes on purchase decisions, bringing the market to screeching halt. People decided to hold onto their old cars; any saving could come in useful on a rainy day, they thought. Others decided to wait in the hope that prices would drop. The market's grinding standstill was augmented by reluctance on the part of banks to give out car financing and rumours that customs on imported cars would drop. However, this year the story is much different. "I believe that the Egyptian car market has emerged back again after recovering from the recession," Ahmed El-Mazahi, Ghabbour marketing research and development manager, told Al-Ahram Weekly. He pointed out that the global credit crunch had caused funding to shrink causing a contraction in the sales volume of cars. "Some 60 per cent of the volume of transactions in the Egyptian car market before the global economic crisis was through bank loans and credit." But today, things are looking up. "Banks have regained confidence in the market and now there is a brutal challenge between them to offer customer- focussed financing solutions that help them get the car of their choice within their limited financial capabilities," Sami Salah Metwali, head of the Car Finance Unit of the Egyptian Gulf Bank (EGB), told the Weekly. "Despite the recession that accompanied the economic crisis, it is all going good now after the new campaigns that the banks led side by side with leading car distributors in Egypt," Metwali said. Another factor that kept a large segment from buying cars -- particularly in the last quarter of 2009 -- was rumours on steep tariff cuts, a fact that should lead to cheaper prices. However, prices did not drop as expected, though the market did witness a 10 per cent drop on customs tariffs of cars imported from the EU. The cut is part of the agreement between Egypt and the EU within the framework of the Egypt-EU Association Agreement and under the General Agreement on Tariffs and Trade (GATT). By virtue of the agreement, customs on EU cars will drop annually by 10 per cent until reaching zero tariffs by 2020. But experts believe the 10 per cent reduction will not have a significant impact on the market yet. "The current decrease in the customs duties on cars from Europe will not be felt by consumers," El-Mazahi said. He noted that the reduction is on the customs paid on the cars, not the full price of the car. "A car that cost LE100,000 will drop only by LE4,000 to LE96,000. It would have had a major impact if it had been a 50 per cent cut," he said. Nowhere was this more apparent than at the 17th Al-Ahram Motor Show that ended recently. The number of visitors this year increased from 140,000 to exceed 250,000. Passenger car sales in Egypt grew 25 per cent year- on-year in October 2009, according to data released by the Automotive Marketing Information Council (AMIC). The marginal increase is seen as a sign of increased consumer confidence. Car sales rose to 16,212 units during December 2009, resulting in full year sales of 200,000 units, compared with 218,000 units in 2008. Sales started improving during the second half of the year. In the first six months of 2009 there had been a decline. Year-on-year sales in June 2009 totalled 90,357 cars compared to 141,796 cars the previous year, with the volume of passenger cars decreasing the most by 38 per cent. The market was due to witness a development in the second half of 2009 since the economy looks to be recovering somewhat, but nonetheless, the month of Ramadan was not typically a time of heavy vehicles sales. In addition, while a succession of holidays following the religious festival was not also conducive to new car sales. "Not all the prices declined this year compared to the last year," Adel Ali, a car dealer, told the Weekly. "If there was a decrease in some prices of brands due to the recession of the market, there are also some brands that decreased prices due to brutal competition from other brands," he emphasised. Ali said that last year on average only two or three customers per day would ask him about prices whereas normally he might expect 10 per day and one to actually buy a car. Finally, the issue of congestion on already highly populated roads comes to the fore vis-a-vis the expected 25 per cent average annual growth in car sales. The government's vehicle replacement schemes will play a big part in ensuring that sales growth will not generate heavier traffic and pollution. In addition to its taxi replacement scheme, the government is supporting the replacement of microbuses over 20 years old and is planning a private car- scrapping scheme.
