Reduction of customs duties and an international auto exhibition breathed life into the automotive market this month, Ahmed Kotb reports Bringing in a wide variety of car manufacturers, suppliers and agents in one place, the International Motor Show Formula Al-Ahram was held in Cairo 12-16 January for the 18th consecutive year. It introduced car models displayed for the first time in Egypt, provided car manufacturers with large showrooms, allocated huge spaces for spare parts suppliers and car designers, as well as tuning and classic cars areas. Considered one of the largest automotive exhibitions in the Middle East and the only motor show approved by the International Organisation of Motor Vehicle Manufactures in the Middle East and North Africa (MENA) region, Formula Al-Ahram is thought of as an opportunity for customers to both see new models and take advantage of the best offers on cars. This year's event was very special, though, because of the much awaited 10 per cent reduction of customs duties on imported cars from the European Union for the second year in a row, as well as market recovery from the global economic recession. The cut is a result of an Egyptian-European agreement which stipulates an annual decrease of 10 per cent on customs duties on cars with engine capacity of less than two litres, while cars of more capacity will enjoy a 13.5 per cent customs reduction. The gradual decrease started January 2010 and will end January 2019 when duties reach zero level. Some 450 car brands participated in the exhibition, showing off their best models and offers made especially for the motor show. "Prices of all models were discounted just before the end of 2010," said Rami Samir, sales executive at the Bavarian Automotive Company, which sells BMW cars. Although the reduction was not that large, according to Samir, customers always ask about the decreased prices as a result of the European agreement. He added that the 10 per cent decline in customs only affects cars fully imported from the European Union and that only one model from BMW is subject to this reduction, because all other models -- like the majority of cars available in the Egyptian market -- are being locally assembled. Effat Abdel-Aati, head of the cars division at the Cairo Chamber of Commerce, stated that European cars assembled in Egypt will not be affected by the European agreement because they are being imported as parts. Abdel-Aati told Al-Ahram Weekly that prices of locally assembled cars are directly related to the value of the euro, and that is why some European brands have raised prices because of today's higher euro value. "A special offer of up to LE3,000 price deduction was made on all cars sold by Abu Ghali Automotive [AGA]," said Islam Helmi, sales executive at AGA, which sells a variety of car brands. Helmi stressed that the offer will be extended until the end of January, which is always a quiet month of sales. Ten banks were present during Formula Al-Ahram, providing customers with the best offers and payment facilities on car loans. "Car loans are growing at a rapid pace," Mohamed Ali, manager of the department of car loans in Banque Misr (BM), told the Weekly. He stated that there is a monthly increase of 50 per cent in the number of car loans since BM kicked off this service in January 2010. Ali pointed out that the number of loans given out by BM never declined because clients can receive the loan and buy the car they want at any time in the near future. "The loan approval could be renewed if the client wants to postpone buying the car," Ali said. Despite the huge exhibition, interesting offers and reduced prices on cars, the demand during the first half of January 2011 was clearly low, but that is supposed to be normal. December, January, and February are normally the worst months of the year in terms of car sales. One important reason, Abdel-Aati says, is the cold and volatile weather. Besides, he added, any major political crisis has an impact on car trade eventually. "The political situation in Tunisia has a direct impact on the market," Abdel-Aati stressed, adding that Tunisia is one of four countries who have signed the Agadir agreement in 2004 which comprises free car trade between Egypt, Jordan, Morocco and Tunisia. "The tragic incident of the Two Saints Church early this month also made people postpone their buying decision," Abdel-Aati noted. Abdel Aati believes the impact of the Egyptian-European agreement will not result in noticeable decrease in prices before 2013 when the cumulative decrease on customs duties reaches 40 per cent, adding that the impact will be more evident on brands with engine capacity of more than two litres. According to Automech Akhbar Al-Yom website, Egypt has the fastest growing automotive market in the MENA region with six million cars on its streets and a steady increase of approximately 200,000 units per year. A recent report issued in September 2009 by the Automotive Marketing Information Council (AMIC) stated that total vehicles sales in the Egyptian market are expected to reach an estimated 3,491,144 units during the next 10 years.
